Deadlines, Penalties and Official Sources
Tax instalments in Canada: who must pay, the three methods and how to avoid interest
Who must pay quarterly tax instalments ($3,000 net tax owing, $1,800 in Quebec), the March, June, September and December dates, three calculation options and a retiree example.
You have to pay quarterly tax instalments for 2026 if your net tax owing (tax minus tax withheld at source) is more than $3,000 in 2026 and was also more than $3,000 in either 2025 or 2024. In Quebec the threshold is $1,800 of net federal tax owing (and Revenu Québec applies its own $1,800 test for Quebec tax). Instalments are due March 15, June 15, September 15 and December 15. If you pay the amounts on the CRA's instalment reminders on time, the CRA will not charge instalment interest, even if your actual tax turns out to be higher. Instalments mostly affect retirees, landlords, investors and the self-employed, whose income has little or no tax withheld.
This guide sits in the mistakes and sources hub. It is general information, not tax advice.
Who usually ends up paying instalments
| Situation | Why tax is not withheld |
|---|---|
| Retirees with RRIF minimum withdrawals, CPP and OAS | No withholding on RRIF minimums; little on CPP and OAS unless requested |
| Landlords | Rental income has no withholding |
| Investors with large interest, dividends or capital gains | No withholding on non-registered investment income |
| Self-employed and freelancers | No employer withholding |
| Employees with large side income | Withholding covers only the salary |
| Spouses receiving split pension income | The split moves income, but withholding may not keep pace |
Outside Quebec, net tax owing includes federal and provincial tax. If your net tax owing is above $3,000 only once, for example because of a one-time capital gain, you will not be required to pay instalments unless the earlier-years test is also met.
The three ways to calculate
| Option | How the amount is set | Best when |
|---|---|---|
| No-calculation (reminder) | Pay the amounts on the CRA's reminders: March and June are each one-quarter of your net tax owing two years ago; September and December balance to your previous year's net tax owing | Income is stable or rising; guarantees no instalment interest if paid on time |
| Prior-year | One-quarter of last year's net tax owing each quarter | Income is falling compared with two years ago |
| Current-year | One-quarter of your estimated net tax owing for this year | Income has dropped a lot this year, but you bear the risk if the estimate is low |
With the prior-year and current-year options, you are charged instalment interest if your payments turn out to be less than required under the option you chose. Only the reminder method protects you completely if you pay exactly what is shown and on time.
Worked example: retiree in Ontario (illustrative)
Lee is 72 and receives a RRIF minimum of $40,000, CPP of $12,000 and OAS. Only small amounts are withheld from CPP and OAS. Lee's net tax owing was $4,400 for 2024 and $4,800 for 2025, and is expected to be about $5,000 for 2026.
- Reminder method for 2026: March and June: $4,400 ÷ 4 = $1,100 each. September and December: ($4,800 − $2,200) ÷ 2 = $1,300 each. Total $4,800.
- At filing time in spring 2027, Lee pays the remaining $200 (5,000 − 4,800) by April 30, 2027, with no instalment interest.
Alternative: Lee can ask Service Canada to withhold more tax from CPP and OAS, or ask the RRIF provider to withhold tax on the minimum payment. Enough withholding can bring net tax owing below $3,000, which ends the instalment requirement after the two-year test.
Interest, contra-interest and penalties
- Instalment interest is charged at the CRA's prescribed rate, compounded daily, on each late or missing instalment from its due date.
- Early or extra payments earn credit interest (sometimes called contra-interest) that can offset instalment interest charged for the same year, though it is not refunded on its own. Catching up early in the year can therefore cancel some interest from a missed March payment.
- Instalment interest of $25 or less for a year is generally not charged.
- An instalment penalty applies only if instalment interest for the year is more than $1,000, under a further formula.
Instalments are payments on account, not a separate tax. They are credited on your return (line 47600), and any overpayment is refunded.
Quebec
Quebec residents can owe instalments to both governments:
- Federal: threshold $1,800 of net federal tax owing (because the federal return of a Quebec resident does not include Quebec tax), in the year and in one of the two previous years.
- Quebec: Revenu Québec requires instalments if Quebec net tax owing is more than $1,800 in the year and in one of the two previous years, with the same March, June, September and December dates.
Revenu Québec sends its own instalment notices and charges its own interest; instalments to one government do not count for the other. See Quebec differences.
How to pay
- Online banking (add the CRA as a payee for instalments, using the instalment payment option, not the balance-owing one).
- CRA My Payment or a pre-authorized debit set up in My Account.
- In person at a bank or Canada Post with a remittance voucher.
Using the wrong payee type can apply the payment to a past balance instead of your current-year instalments. Check My Account after paying.
Frequently asked questions
I received a reminder but my income has dropped. Must I pay?
You are not obliged to pay the reminder amount if you use the prior-year or current-year option and pay enough under that option. If your estimate is too low, instalment interest applies. The reminder is a safe harbour, not a bill.
Do employees ever need to pay instalments?
Rarely, unless they have significant other income or have claimed more than they should on their TD1, or receive pension splitting income without withholding.
What if I miss a payment?
Pay as soon as possible; extra payments later in the year earn credit interest that offsets instalment interest. Missing payments repeatedly can lead to penalties.
Does the first year of self-employment require instalments?
Usually not in the first year, because the two-year test looks at prior years. In the second and later years reminders arrive automatically.
Official sources
- Canada Revenue Agency — instalment rules, reminders and payment options
- Revenu Québec — Quebec instalments
- Justice Laws Website — instalment rules in sections 156 and 156.1 of the Income Tax Act
- CRA: late-filing penalty and interest — related penalty rules
