Advance tax on RSU income India: quarterly calendar and how to avoid penal interest

When RSUs vest, your employer (the Indian subsidiary) deducts TDS on the perquisite value and deposits it with the government. For most employees, this TDS covers the tax on RSU income reasonably well.

But there's a scenario where it doesn't: when your total tax liability for the year exceeds what your employer's TDS covers — which happens when you have capital gains from selling RSU shares, dividend income, other investment income, or when the employer's TDS calculation uses a different rate than your actual slab.

In those cases, you must pay advance tax in quarterly instalments. If you don't — or if you underpay — the Income Tax Department charges penal interest under Sections 234B and 234C at 1% per month on the shortfall.

This guide explains the advance tax system, how it applies to RSU holders, and how to calculate and calendar your payments.

Who needs to pay advance tax

You must pay advance tax if your net tax liability (after TDS credits) exceeds ₹10,000 in a financial year.

Net tax liability = Total income tax + surcharge + cess on all income − TDS already deducted

For an engineer earning ₹25 lakh salary + ₹40 lakh RSU perquisite = ₹65 lakh total income: the tax liability is substantial, and your employer's TDS may cover the salary and RSU portions well. But if you also:

• Sold RSU shares and realised ₹8 lakh in STCG (taxed at 30% slab = ₹2.4 lakh additional tax)
• Received ₹50,000 in US dividends (taxed at slab = ₹15,000 additional tax after credit)

...then your net tax liability after employer TDS is ₹2.4L + ₹15,000 = ₹2.55 lakh — well above the ₹10,000 threshold. You owe advance tax.

The four advance tax deadlines

Instalment	Deadline	Cumulative % of total tax due by this date
1st	June 15	15%
2nd	September 15	45%
3rd	December 15	75%
4th	March 15	100%

Financial year: April 1 to March 31. For FY 2026-27, the deadlines are June 15, 2026; September 15, 2026; December 15, 2026; and March 15, 2027.

These percentages are cumulative — if you miss the June instalment and pay double in September, you still owe interest on the June shortfall for the period from June 15 to September 15.

Section 234C penal interest: the cost of getting it wrong

Section 234C charges 1% per month (simple interest) on the shortfall between what you should have paid by each deadline and what you actually paid.

Shortfall period	Interest rate
June 15 shortfall	1% per month for 3 months (June 15 → Sep 15)
Sep 15 shortfall	1% per month for 3 months (Sep 15 → Dec 15)
Dec 15 shortfall	1% per month for 3 months (Dec 15 → Mar 15)
Mar 15 shortfall	Interest under 234B on unpaid tax, not 234C

Example: You owe ₹5 lakh total advance tax. You pay nothing in June, nothing in September, and pay ₹5 lakh in December.

• June 15 shortfall: 15% × ₹5L = ₹75,000 unpaid. Interest: ₹75,000 × 1% × 3 months = ₹2,250
• September 15 shortfall: 45% × ₹5L = ₹2,25,000 − ₹0 paid = ₹2,25,000 unpaid. Interest: ₹2,25,000 × 1% × 3 months = ₹6,750
• Total 234C interest: ₹9,000

Not ruinous on ₹5 lakh — but on ₹25 lakh total advance tax with missed instalments, the same calculation produces ₹45,000+ in penal interest.

Section 234B: for not paying enough by March 31

If your total advance tax paid by March 31 is less than 90% of your total tax liability, Section 234B interest applies at 1% per month from April 1 of the assessment year until you file your ITR (or until the full tax is paid, whichever is earlier).

This is the more serious penalty. If you pay nothing in advance tax and owe ₹20 lakh, 234B interest accrues at ₹20,000/month from April 1 until you file — often 4–5 months = ₹80,000–₹1 lakh in interest just for late filing.

The RSU advance tax problem: estimating income mid-year

The challenge for RSU holders is that some income components are known precisely only after they occur:

Income component	When known	How to estimate
Salary	Start of year (offer letter or last year's slip)	Highly predictable
RSU perquisite at vest	Only when shares vest (depends on stock price at vest date)	Estimate using current stock price × shares vesting this year
Capital gains from selling	Only when you sell	Estimate based on planned sell decisions
Dividends	When received	Estimate based on holdings × dividend yield

The stock price uncertainty: If you plan to sell RSUs that vest in October, you don't know in June what the stock price will be. You're estimating both the perquisite (at vest) and the capital gain (at sale) using today's price.

Safe approach: Use today's stock price as your estimate for both perquisite and sale price. This is conservative — if the price rises, you'll owe more; if it falls, you'll owe less. The government accepts estimates made in good faith.

How to calculate your advance tax: step by step

Step 1: Estimate total income for the financial year

Source	Estimate
Salary (gross)	₹___ lakh (from monthly salary × 12)
RSU perquisite	Shares vesting this year × current stock price × SBI TTBR
Capital gains (planned sales)	Planned sell quantity × (estimated sale price − cost basis)
Dividend income	Holdings × dividend yield × SBI TTBR
Other income	FDs, rental, etc.
Total estimated income	₹___ lakh

Step 2: Compute total tax

Apply the current income tax slab + surcharge + health and education cess to total estimated income. Use the new tax regime or old regime, whichever you'll file under (advance tax is paid under the same regime as ITR).

For FY 2026-27, under the new regime:

Income	Rate
Up to ₹4 lakh	0%
₹4–8 lakh	5%
₹8–12 lakh	10%
₹12–16 lakh	15%
₹16–20 lakh	20%
₹20–24 lakh	25%
Above ₹24 lakh	30%

Add surcharge: 10% on tax if income > ₹50 lakh; 15% if > ₹1 crore; 25% if > ₹2 crore; 37% if > ₹5 crore (marginal relief applies at each threshold).

Add health & education cess: 4% on (tax + surcharge).

Step 3: Deduct TDS

Your employer's TDS (from Form 26AS or AIS) is credited against your advance tax liability. If the employer has deducted ₹X in TDS, your remaining liability is: Total tax − ₹X.

Step 4: Determine if advance tax applies

If remaining liability > ₹10,000 → advance tax is required.

Step 5: Split into instalments

Deadline	Amount to pay
June 15	15% of (total tax − expected TDS for full year)
Sep 15	45% − what you paid in June
Dec 15	75% − what you paid in June + Sep
Mar 15	100% − total paid so far

Worked example: Staff Engineer, Bengaluru (Cisco, annual vest)

Income:

• Salary: ₹35 lakh
• RSU perquisite: $60,000 × ₹84 TTBR = ₹50.4 lakh (November vest)
• Planned RSU sale: ₹15 lakh STCG (selling immediately after vest)
• Total income: ₹1,00,40,000 ≈ ₹1 crore

Tax computation (new regime):

• Tax on ₹1 crore: approximately ₹26.7 lakh (marginal rate 30%)
• Surcharge (15% as income > ₹1 crore): ₹4 lakh
• Cess (4%): ₹1.23 lakh
• Total tax: ≈ ₹31.9 lakh

TDS by employer: Cisco India payroll deducts TDS on salary and RSU perquisite over the year. Estimate employer TDS = ₹28 lakh.

Remaining advance tax liability: ₹31.9L − ₹28L = ₹3.9 lakh

Advance tax schedule:

• June 15: 15% × ₹3.9L = ₹58,500
• Sep 15: (45% − 15%) × ₹3.9L = ₹58,500 more (₹1,17,000 cumulative)
• Dec 15: (75% − 45%) × ₹3.9L = ₹58,500 more (₹1,95,000 cumulative)
• Mar 15: remaining ₹1,95,000

The catch: The RSU vests in November. In June, you're estimating based on current Cisco stock price. If Cisco's stock is at $55 today but vests at $65 in November, your actual liability is higher — you'll need to top up in December and March.

The November/December vest problem

Many companies (Cisco, Broadcom, Salesforce) vest in October–November. This creates a specific advance tax timing problem:

• June and September instalments are paid before the vest — based on estimates
• The actual perquisite is known only in November
• The December 15 instalment is paid after the vest — you can compute actual liability

Practical approach:

1. In June, estimate conservatively (use current stock price × shares vesting)
2. In September, use updated stock price
3. In December, after the actual vest, compute exact liability and pay the correct December instalment
4. If you underpaid in June/September, you'll owe 234C interest on the shortfall — but the December catch-up limits the damage

How to pay advance tax

Via income tax portal (recommended):

1. Log in at incometax.gov.in
2. Go to e-Pay Tax → New Payment
3. Select Challan 280
4. Choose "Advance Tax" (Code 100)
5. Enter assessment year (for FY 2026-27 advance tax, AY = 2027-28)
6. Pay via net banking or UPI

Via bank: Most PSU banks accept Challan 280 across the counter. Keep the challan receipt — you'll need the BSR code and challan number for ITR-2.

Via your CA: Many CAs make advance tax payments on behalf of clients as part of their service. Confirm whether this is included in your filing agreement.

Advance tax and TDS from employer: how they interact

Your employer deducts TDS at source from salary and RSU perquisite payments. This TDS is deposited with the government under your PAN and appears in Form 26AS / AIS.

When computing advance tax, you deduct the expected full-year TDS from your total tax liability, then split the remainder across the four instalments. You do not pay advance tax on income that has already had TDS deducted — that TDS credit is applied against the same liability.

Reconciliation at filing: When you file ITR-2:

• Total tax liability is computed on actual income
• TDS credits from Form 26AS are applied
• Advance tax payments (from challan receipts) are applied
• Any remaining tax due is self-assessment tax (Code 300, not Code 100)
• Any excess is a refund

Common mistakes RSU holders make

1. Not paying advance tax at all — assuming employer TDS covers everything. It often does for salary alone, but capital gains and dividend income require separate advance tax payments.

2. Using wrong assessment year — advance tax for FY 2026-27 is AY 2027-28. Challan 280 must specify AY 2027-28, not 2026-27.

3. Forgetting capital gains — especially from selling RSUs during the year. These are not covered by employer TDS; you owe advance tax on them separately.

4. Waiting until March — paying all advance tax in March avoids the December instalment but triggers 234C interest for the period from June 15, Sep 15, and Dec 15 to the date of payment.

5. Not adjusting for stock price changes — if your employer's stock rose 30% between June (when you estimated) and November (when it vested), your actual liability is higher. Adjust in December.

Related reading

• How RSU double-taxation works — the three tax events at vest, sale, and repatriation
• ITR-2 walkthrough for RSU holders — full filing guide
• LRS, TCS, and Schedule FA trifecta — full compliance picture
• Schedule FA complete guide — foreign asset disclosure in ITR-2