Challan 280 Advance Tax Payment Declaration

A Challan 280 Advance Tax Payment Declaration in India provides a signed declaration of the matters it covers, creating a record the recipient can rely on.

Section 208 of the Income Tax Act 1961 mandates advance tax payment for every taxpayer whose estimated tax liability for the financial year exceeds ₹10,000, after deducting Tax Deducted at Source (TDS). This threshold applies to individuals, Hindu Undivided Families (HUFs), firms, Limited Liability Partnerships (LLPs), companies, and all other assessable entities. The Central Board of Direct Taxes (CBDT), functioning under the Ministry of Finance, administers the advance tax framework. Taxpayers interact with the Income Tax Department through the Income Tax Portal (incometax.gov.in) and, for payment, through the NSDL/Protean TIN portal or the bank's internet banking platform.

Advance tax is colloquially described as a 'pay as you earn' system, similar to the TDS framework applicable to salaried employees. For non-salaried taxpayers — including business owners, professionals, investors with capital gains, and individuals with significant rental or investment income — advance tax is the primary mechanism for periodic tax compliance throughout the financial year. The four quarterly instalments fall due on 15 June (at least 15% of estimated liability), 15 September (cumulative 45%), 15 December (cumulative 75%), and 15 March (100%) under Section 211.

Challan ITNS 280 is distinct from other income tax challans: Challan ITNS 281 is for TDS/TCS payments, and Challan ITNS 282 is for payment of wealth tax, gift tax, and other specified taxes. Taxpayers using Challan 280 must select the correct payment code: Code 100 for advance tax, Code 300 for self-assessment tax (paid when filing the ITR after year-end), and Code 400 for tax on regular assessment (paid in response to a demand notice from the Assessing Officer).

The declaration document associated with Challan 280 serves multiple purposes: it records the taxpayer's calculation of estimated income and tax liability, documents the instalment amounts and due dates, and preserves the Challan Identification Number (CIN) — the combination of the BSR code of the bank branch, the date of deposit, and the challan sequence number — which is mandatory for completing the Income Tax Return filing. Failure to correctly report CIN details in the ITR can result in a mismatch with Form 26AS and generate a tax demand notice from the Income Tax Department.

For taxpayers opting for the presumptive taxation scheme under Section 44AD (for businesses with turnover up to ₹3 crore) or Section 44ADA (for professionals with receipts up to ₹75 lakh), the advance tax obligation is simplified: the entire advance tax for the year is due in a single instalment by 15 March, eliminating the quarterly instalment requirement applicable to regular taxpayers.

A Challan 280 Advance Tax Payment Declaration is needed by every taxpayer in India whose estimated income tax liability for the financial year exceeds ₹10,000, after accounting for TDS, in order to document compliance with the advance tax obligations under Sections 207 to 211 of the Income Tax Act 1961.

Salaried employees with significant other income: A salaried employee whose employer deducts TDS under Section 192 on salary income may still need to pay advance tax if they have additional income — such as rental income, interest income on fixed deposits, short-term or long-term capital gains on sale of shares or property, or freelance or consultation income — on which no TDS has been deducted. Where the net tax on the additional income exceeds ₹10,000, advance tax must be paid by 15 March (at minimum) or in quarterly instalments depending on when the income arises.

Self-employed professionals under Sections 44ADA: Doctors, lawyers, architects, chartered accountants, engineers, and other professionals covered by Section 44ADA of the Income Tax Act 1961 with gross receipts exceeding ₹50 lakh must compute advance tax on their presumptive income (50% of gross receipts) and pay the full amount in one instalment by 15 March each year.

Business owners under regular taxation: Business owners not opting for Section 44AD presumptive taxation must estimate their annual profits quarterly and pay advance tax in four instalments. Businesses with seasonal income (e.g., festival-dependent retail, agricultural processing, hospitality) must carefully estimate their year-to-date and projected profits before each instalment due date.

Investors realising capital gains: Capital gains from sale of listed equity shares (short-term gains taxable at 20% under Section 111A and long-term gains above ₹1.25 lakh taxable at 12.5% under Section 112A, following the Finance Act 2024 amendments), sale of property, sale of debt mutual funds, or redemption of other capital assets generate advance tax obligations in the quarter in which the gains are realised. A taxpayer who sells a property in October must include the capital gains in the December instalment calculation.

NRI taxpayers with Indian income: Non-Resident Indians (NRIs) with rental income from Indian property, capital gains on Indian assets, or interest from Indian bank accounts (NRO accounts) are taxable in India and must pay advance tax on such income, typically through the NSDL portal using their Indian PAN.

Corporate taxpayers: All domestic companies and foreign companies with Indian taxable income are required to pay advance tax in four quarterly instalments. Companies opting for Section 115BAA (reduced tax rate of 22%) must still comply with advance tax instalments based on their estimated income.

A complete Challan 280 Advance Tax Payment Declaration must capture all details necessary for accurate ITR filing and to defend the taxpayer against any demand notices from the Income Tax Department arising from discrepancies in Form 26AS or the Annual Information Statement (AIS).

Taxpayer identification details: The PAN (Permanent Account Number) of the taxpayer is the single most critical field in Challan 280. The PAN links the payment to the taxpayer's account in the Income Tax Department's records. An incorrect PAN results in the payment being credited to the wrong account and creates a tax demand against the actual taxpayer. The Assessment Year (AY) — always one year ahead of the Financial Year, so FY 2024-25 corresponds to AY 2025-26 — must be correctly selected to confirm the payment is credited to the correct year's liability.

Payment type code: The declaration must clearly record the payment type code: Code 100 for advance tax (periodic instalments during the financial year), Code 300 for self-assessment tax (paid while filing the ITR), or Code 400 for tax on regular assessment. Selecting the wrong code does not prevent the payment from being credited but creates reconciliation complications during ITR filing.

Instalment schedule and amounts: The declaration should record each quarterly advance tax instalment separately, showing the due date, the percentage of estimated liability due on that date (15%, 45%, 75%, 100% cumulatively under Section 211), the cumulative estimated liability at the time of payment, and the amount actually paid. Maintaining this schedule helps identify any shortfall subject to interest under Section 234C.

Estimated income computation: The basis for each advance tax payment is the taxpayer's estimate of total taxable income for the year, broken down by income head — salary, business/profession, capital gains (short-term and long-term separately), house property, and other sources. The declaration should document this estimate at each instalment date, showing how the estimated liability was calculated and why the particular instalment amount was paid.

Challan Identification Number (CIN): After each payment, the bank generates a CIN comprising the BSR code (7-digit code of the bank branch at which payment was accepted), the date of deposit in DD/MM/YYYY format, and the challan serial number. All three elements must be recorded precisely in the declaration, as they must be entered identically in Schedule IT (advance tax) of the Income Tax Return. A mismatch between the CIN in the ITR and the CIN in the department's records triggers a scrutiny notice or demand.

TDS and TCS credit verification: The advance tax calculation must account for TDS already deducted or expected to be deducted during the year from salary (Section 192), bank interest (Section 194A), rent (Section 194I), professional fees (Section 194J), capital gains proceeds (Section 194-IA for property), and other sources. The declaration should list the anticipated TDS credits and show the net advance tax obligation after accounting for these credits. Discrepancies between expected and actual TDS credits, visible in Form 26AS and the AIS, must be investigated and resolved before ITR filing.

Interest computation for delayed payment: Where any instalment is paid after the due date or in an amount less than required under Section 211, interest under Section 234C at 1% per month accrues on the shortfall for 3 months (1 month for the March instalment). Where the total advance tax paid is less than 90% of assessed tax, interest under Section 234B at 1% per month accrues from 1 April of the assessment year. The declaration should compute these interest amounts to help the taxpayer budget for the final tax payment at ITR filing time. The forms-legal.com Challan 280 Advance Tax Payment Declaration template covers the mandatory elements under Income-tax Act, 1961.