Advance tax- pay while you earn

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What is advance tax?

Advance tax is the tax which is paid in the same fiscal year in which the income is earned. As against the self-assessment tax paid which is paid after the close of the fiscal year, advance tax is paid by way of quarterly four instalments before the respective due dates. The law relating to advance tax is enumerated in section 208, 209, 210 and 211 of the income tax Act.


Who is liable to pay Advance tax?

The liability to pay the advance tax is enumerated under section 208 of the Income Tax Act. Aa person is liable to pay advance tax if his estimated tax liability for the financial year is equal to or exceeds INR 10,000.


Such liability to pay advance tax is on all the assesse may be resident or non-resident. However as per section 207 of income tax Act a resident of age 60 years or above is not liable for the payment of advance tax if he is not having income under the head business and profession.


Non-payment or deferred payment of advance tax attracts interest under section 234B & 234C.

How to Compute advance tax payable?

The advance tax is required to be computed in the manner as provided under section 209 of the Income tax act by the assessee. Such computations shall be made taking into consideration following;


  1.  step, estimate the total income under all heads of income
  2. step, reduce the amount of deduction available under chapter VI-A
  3. step, estimate the current income for the financial year (step I – Step II) above
  4. step, calculate current tax applying the rate of tax as applicable for financial year
  5. step, calculate the TDS and TCS deductible or collectible at source on incomes in step I.
  6. step, advance tax = step IV – Step V


What are the special provisions for eligible assessee under section 44AD?

In case of eligible assessee as referred to in section 44AD,100 % of advance tax can be paid in a single instalment before 15th March of the financial year.



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