Section 403 to 408, Income-tax Act 2025: Advance tax liability, computation and instalments

What is advance tax, and where did Sections 207 to 211 go?

Advance tax is the pay-as-you-earn side of income tax: instead of paying the whole year's tax when you file, you pay it through the year in instalments, so the government collects tax close to when the income arises. Salaried people meet it invisibly through monthly TDS; everyone whose income is not fully covered at source has to pay it themselves.

The 1961 Act ran the rules across five sections, 207 to 211. The Income-tax Act 2025 carries every one of them forward unchanged in substance and only renumbers them, into Sections 403 to 408. The numbers below are the ones to quote now, but the tax, the dates and the thresholds are exactly what they were.

Section numbers cross-checked against published copies of the enacted Act. The interest for paying late (old Sections 234A, 234B and 234C) sits further on in the same chapter, at Sections 423, 424 and 425.†

Who must pay advance tax, and who is exempt?

Anyone whose income-tax for the year, after the TDS and TCS others collect, comes to ₹10,000 or more. Section 404 sets that floor and Section 403 makes your current year's income the thing you are paying tax on ahead of time. In practice it catches the people whose tax is not already mopped up at source:

• Freelancers, consultants and professionals whose clients do not deduct enough TDS to cover the bill.
• Business owners who are not on the presumptive scheme, and F&O or intraday traders.
• Landlords, and anyone with sizeable bank interest, dividends or capital gains sitting on top of a salary.
• Salaried people with a second income the employer does not know about, unless they declare it and let payroll raise the TDS.

TDS counts as tax paid on time whenever in the year it is deducted, so a salaried person whose employer TDS covers the whole liability has no advance tax to pay and no instalment dates to watch.

Is a resident senior citizen really exempt?

Yes, on a narrow but valuable condition. Section 403(3) writes a resident individual out of the advance-tax schedule entirely if they are 60 or older at any time in the tax year and have no income under the head profits and gains of business or profession. A retiree living on pension, interest and rent pays nothing in advance and clears the whole bill as self-assessment tax when filing, with no advance-tax interest to worry about.

The catch is the business-income test, not the age. Start a consultancy, take up freelance work or run any proprietorship, and the exemption disappears however old you are, putting you back on the four-date calendar. Non-residents get no version of this relief; the exemption is for resident seniors only.

How much is due, and by when?

In four cumulative instalments across the tax year. Section 408 fixes both the share and the date, and the share is a running total of the year's estimated tax, not a fresh slice added each time.

By 15 June you should have paid 15% of the year's advance tax; by 15 September 45%; by 15 December 75%; and by 15 March the full 100%. Cumulative is the word that matters: the 45% due in September is the total you should have reached by then, so ₹67,500 on a ₹1,50,000 liability, not ₹67,500 on top of what you paid in June.

Presumptive taxpayers get a shortcut: declare income under Section 58 (the old 44AD and 44ADA) and Section 408(2) lets you skip the first three dates and pay the whole 100% by 15 March. Anything paid by 31 March counts as advance tax for the year just ended (Section 408(3)). When the 15th falls on a weekend or bank holiday, the date rolls to the next working day.

How do you calculate advance tax?

Estimate the year, tax it, then take off what others will deduct. Section 405 puts it as a formula, A = B minus C: A is your advance tax, B is the tax at this year's rates on your estimated total income, and C is the TDS and TCS due to be collected on that income.

Four steps, done at the start of the year and revised as your income firms up:

• Estimate your total income for the whole tax year: salary, business or professional income, interest, rent, dividends and any capital gains you can foresee.
• Work out the tax on it at this year's slab rates for your regime, then add the 4% health and education cess. That is figure B.
• Subtract the TDS and TCS that others are due to deduct on that income, which is figure C. What is left is your advance tax.
• If that figure is ₹10,000 or more, it is payable on the instalment calendar. Re-run the estimate through the year and adjust the next instalment if your income has grown.

You reduce by the TDS that is deductible on your income, so you never pay advance tax on income already covered at source. Income you cannot predict, chiefly capital gains, is treated gently: you are not expected to fund tax on a gain before you make it, and the interest rules carve it out.

Paying on your own, or on the Assessing Officer's order

Almost everyone pays advance tax on their own estimate, with no notice and no form to file first. Section 406, the own-accord limb of the old Section 210, simply expects you to compute the figure yourself and pay each instalment by its date.

Section 407 covers the rarer case. Where you have been assessed before, the Assessing Officer can issue an order requiring you to pay advance tax, worked on your last assessed or returned income. If your own estimate is lower, you file a counter-estimate and pay on that; if it is higher, you pay the higher figure. For an ordinary individual or a freelancer this order almost never arrives, but the power is on the books.

What if you pay late, short, or not at all?

Two interest charges, both at 1% a month, and neither is a penalty you can argue down. Section 425 (the old Section 234C) is the deferment charge: miss a date's 15%, 45%, 75% or 100% target and interest runs on that shortfall, three months for each of the first three dates and one month for 15 March. Section 424 (the old Section 234B) is the year-end charge: if your advance tax came to less than 90% of your assessed tax, 1% a month runs on the whole shortfall from 1 April until you clear it.

The two meter different periods, so a taxpayer who drifts all year usually pays both. Our Section 424 and 425 page works the interest in full, with examples, the 12% and 36% safe harbours and the capital-gains carve-out; this page is about the liability and the calendar that feed it.

Resident seniors exempt under Section 403(3) cannot attract either charge, because they have no advance tax to be short of. Presumptive taxpayers face only the single 15 March date.

How to pay advance tax

Online, in minutes, with no form to file. Advance tax is paid through the e-Pay Tax service on the income-tax portal, the successor to challan ITNS 280, and it must be tagged to the right head so it lands as advance tax rather than self-assessment tax.

The steps are the same for every instalment:

• Open e-Pay Tax on the income-tax portal, sign in with your PAN, and set the portal's year field to the year that follows the tax year you are paying (for TY 2026-27, the portal still labels this assessment year 2027-28).
• Pick the payment type Advance Tax, which is minor head 100, not self-assessment tax, which is minor head 300.
• Enter the tax and cess, pay by net banking, UPI, card or over the counter at an authorised bank, and save the challan showing its BSR code and serial number.
• The payment appears in your Form 26AS and AIS and is set off against your final tax when you file, under the credit rule of Section 410 (the old Section 219).

There is nothing to file at the moment you pay; the challan is the record. Keep it until your return for the year is processed and the credit is confirmed.

What to actually do about advance tax

Estimate early and top up honestly. If your income is lumpy, revise the estimate before each date and pay what the running total needs, rather than guessing once in June and forgetting it. On a ₹1,50,000 liability, staying on the 15/45/75/100 calendar costs nothing extra; leaving the whole amount until 15 March adds about ₹6,075 of Section 425 interest for the deferment alone (that is 4.05% of the tax you deferred).

Salaried filers with side income have a zero-effort fix. Declare the extra income to your employer on Form 12BB and let payroll raise your TDS. Because TDS counts as paid on time whenever it is deducted, it clears both the ₹10,000 test and the instalment dates without a single challan to remember.

If you are 60 or older, guard the exemption. A resident senior with only pension, interest and rent owes no advance tax, but the moment any business or professional income appears, even a small consultancy, the entire liability comes back on the four-date calendar. Weigh that before turning a hobby into a proprietorship late in the year.

Do not over-pay to feel safe. 1% a month is 12% a year of simple interest, and it is not deductible, so paying on time is a genuinely good use of cash. But excess advance tax comes back only as a refund, at a lower interest rate than the 12% you gave up, so aim to reach 100% of your assessed tax by 15 March, not to sit far above it.

Worked examples

Section 403 to 408 FAQs