Advance tax for RSU holders India: Section 234C installments (AY 2026-27)

Employer TDS handles the salary part of your tax. It does not handle RSU capital gains.

When you sell vested RSU shares and book a gain, no one withholds tax at source. The responsibility falls on you — through the advance tax system — to pay tax on that gain during the financial year, in quarterly installments.

Miss a date or underpay a tranche and Section 234C charges interest. It's not dramatic, but it's avoidable.

The four installment schedule (FY 2025-26 / AY 2026-27)

Due date	Cumulative % of annual liability	Shortfall interest period
15 June 2025	≥ 15%	3 months at 1%/month
15 September 2025	≥ 45%	3 months at 1%/month
15 December 2025	≥ 75%	3 months at 1%/month
15 March 2026	100%	1 month at 1%/month

Section 234C interest is computed on the shortfall at each installment date, not on the cumulative liability. Each installment is tested independently.

Why RSU holders get caught by advance tax

Scenario: You are salaried at ₹18 lakh gross. Your employer deducts TDS on the salary. You vest ₹4 lakh worth of RSU shares in August and sell them in November for ₹5.5 lakh, booking ₹1.5 lakh in short-term capital gains (held < 24 months for US-listed stock).

At 30% slab + surcharge + cess, the tax on ₹1.5 lakh STCG is roughly ₹45,000. Your employer's TDS covers none of this — TDS is computed on salary income only. So ₹45,000 is your advance tax liability.

The advance tax computation:

• 15 June: 15% of ₹45,000 = ₹6,750 (but the vest happened in August — this installment predates the gain)
• 15 September: 45% cumulative = ₹20,250 (gain realised in November — still before this installment?)
• 15 December: 75% cumulative = ₹33,750 (sell happened in November — this is the first date after the gain)
• 15 March: 100% = ₹45,000

This is where the capital-gains-in-last-quarter exception matters.

The last-quarter exception

If capital gains arise after December 15 (i.e., in the January–March quarter), you can pay 100% of the tax on those gains by March 15 with no Section 234C interest on those gains — even though the earlier installments showed a shortfall.

But if the gains arose before December 15 (as in most sell-to-cover situations in Q1–Q3 of the financial year), the exception doesn't apply and you're tested against each installment's cumulative threshold.

Practical result: An RSU holder who sold shares in August, September, or October and paid nothing until March will owe 234C interest on the shortfall at the September 15 and December 15 installments.

How to compute your advance tax

Step 1: Estimate total income for the year

Sum up:

• Salary income from Form 16 estimate (or last year's gross as a proxy)
• RSU perquisite value at each vest (FMV × shares, converted at SBI TTBR)
• RSU capital gains from sales made or expected this year (proceeds − cost basis, both in INR)
• Other income: FD interest, dividends, rental income

Step 2: Estimate total tax

Apply slab rates (old or new regime, whichever you'll use), add surcharge and 4% cess, subtract TDS already deducted by employer and any advance TDS deducted from FD interest.

Step 3: Check the ₹10,000 threshold

If estimated net liability (after TDS) exceeds ₹10,000, advance tax is mandatory.

Step 4: Pay each installment via Challan 280

Pay online at the ITD portal → e-Pay Tax → Self-Assessment / Advance Tax → select Advance Tax (code 100).

Use:

• Assessment Year: 2026-27
• Type: Advance Tax

Keep the BSR code and challan serial number — you'll need them when filing ITR-2.

Section 234C interest computation

For each installment, the interest formula is:

234C interest = Shortfall × 1% × months

Where:

• Shortfall = Required cumulative payment − Amount actually paid by due date
• Months = 3 for June, September, and December installments; 1 for March

Example:

Advance tax liability: ₹60,000

Installment	Required (cumulative)	Paid	Shortfall	Interest
15 June	₹9,000 (15%)	₹0	₹9,000	₹9,000 × 1% × 3 = ₹270
15 September	₹27,000 (45%)	₹0	₹27,000	₹27,000 × 1% × 3 = ₹810
15 December	₹45,000 (75%)	₹45,000	₹0	₹0
15 March	₹60,000 (100%)	₹60,000	₹0	₹0

Total 234C interest: ₹1,080

If this same person had paid all three earlier installments on time, 234C interest = ₹0.

The salaried-employee partial exemption

For individuals whose income consists entirely of salary (no capital gains, no business income, no other non-TDS income), the June, September, and December advance tax installments are optional — you can pay 100% by March 15.

But this exemption disappears the moment you have capital gains or other non-TDS income above ₹10,000. Most RSU holders who sell shares at any point during the year are squarely outside this exemption.

When employer TDS partially covers RSU gains

Some employers compute TDS on the full salary including the RSU perquisite value at vest. In this case:

• The perquisite tax is covered by TDS
• Only the capital gains from subsequent share sales remain uncovered
• Advance tax is required only on the capital gains portion (if > ₹10,000 net of employer TDS credit)

Check your Form 26AS mid-year to see what TDS has already been deposited. If the TDS balance leaves a gap of more than ₹10,000, pay the advance tax installment before the next due date.

What happens if you miss advance tax entirely

If you skip advance tax and pay everything at filing time as self-assessment tax:

• Section 234B applies: 1% per month from April 1 of the assessment year to the date of payment on 90% of the shortfall in assessed tax
• Section 234C applies: interest on each installment shortfall as computed above
• Both run concurrently and are in addition to the self-assessment tax itself

For a ₹1 lakh advance tax liability paid in August (after the July 31 filing deadline instead of during the year), the combined 234B + 234C interest typically works out to ₹5,000–₹12,000 depending on the installment shortfalls. Not catastrophic, but not free.

Practical approach for RSU holders

After each significant RSU sale during the year:

1. Estimate the capital gain (proceeds − cost basis in INR)
2. Compute the approximate tax (at your marginal rate)
3. Check what the cumulative advance tax installment threshold is for the next due date
4. Pay via Challan 280 before that date if you'll cross the threshold

For most salaried RSU holders, the practical approach is to pay advance tax twice a year: once around the December 15 installment (covering gains from H1 of the financial year) and once at March 15 (covering the full year). This minimises the 234C interest to the earlier-installment shortfalls only.

Use the late ITR filing interest calculator to estimate your Section 234A and 234B exposure if you're also filing late.

Quick reference

If you sold RSU shares	Pay advance tax by
April–June (Q1)	15 September at latest (avoid June + September interest)
July–September (Q2)	15 December at latest (avoid September interest)
October–December (Q3)	15 March at latest (avoid December interest)
January–March (Q4)	15 March (last-quarter exception applies — no 234C if paid by March 15)