Taxation · Tax Deduction or Collection at Source and Advance Tax

Advance Tax: Liability and Computation for CA Inter Taxation

Updated 5 October 2026 · Fact-checked

Advance tax is income tax you pay during the tax year itself, in instalments, on your estimated income. You are liable if the estimated tax, after deducting TDS and TCS, is ₹10,000 or more. Compute tax on estimated income, subtract TDS/TCS, then split the balance by the due dates.

Understand Advance Tax: Liability and Computation

Tax is meant to be collected as income is earned, not a year later. TDS does this for income from which tax is deducted. For other income, such as business profit, rent, interest with no deduction, or capital gains, the law uses advance tax. You pay it in the same tax year in which the income arises, based on your own estimate of current-year income.

The test for liability is simple. Estimate your total income for the tax year. Compute tax on it, including surcharge and cess. Reduce it by the TDS and TCS you expect to be deducted or collected on income included in that total. If the balance is ₹10,000 or more, you must pay advance tax. If it is below ₹10,000, you pay nothing in advance and settle the balance as self-assessment tax when you file the return.

Advance tax applies to every kind of assessee: individuals, HUFs, firms, companies and others. There are two special cases. A senior citizen who is a resident individual, aged 60 years or more at any time during the tax year, and who has no income chargeable under the head business or profession is not required to pay advance tax. An assessee who declares profits under the presumptive scheme for eligible business or eligible profession pays the whole advance tax in one instalment, by 15 March. This single instalment is not a general rule for all taxpayers.

For everyone else, advance tax is paid in four instalments. Each percentage is cumulative, so you check how much of the total should have been paid by each date. Income that arises late, such as a capital gain or a lottery win, is simply included in the remaining instalments. The interest for shortfall or delay is a separate topic, but you must know the instalment dates to answer it.

Key rules to remember

Liability test: Advance tax is payable if: (Tax on estimated current-year income − TDS/TCS expected) ≥ ₹10,000; Tax includes surcharge and health and education cess. Use TDS/TCS only on income that is part of the estimated total income.
Advance tax amount: Advance tax = Tax on estimated total income (with cess) − TDS/TCS on income included in that total; This is the total to be paid over the year. Round off as per the question's instruction or the rounding rule for tax.
Instalments for other assessees (not under the presumptive schemes for eligible business or profession): By 15 June: 15% | By 15 September: 45% | By 15 December: 75% | By 15 March: 100%; Percentages are cumulative on the total advance tax. The amount to pay on each date is the difference from the previous percentage.
Assessee declaring profits under the presumptive scheme for eligible business or eligible profession: 100% of advance tax on or before 15 March; This applies only to assessees who declare profits under the presumptive schemes for eligible business or eligible profession. Payment made on or before 31 March of the tax year is also treated as advance tax paid on time.
Resident senior citizen: No advance tax if: resident individual, aged 60 years or more at any time during the tax year, and no business/profession income; All three conditions must be met. Having business or profession income removes the relief.

How to solve Advance Tax: Liability and Computation questions

Use the same sequence for every advance tax question. It keeps your working clear and earns step marks.

1Check who the assessee is: residence, whether an individual aged 60 years or more at any time during the tax year, and whether there is business or profession income or the presumptive scheme for eligible business or profession. This tells you if an exemption or single instalment applies.
2Compute the estimated total income of the tax year under each head, after set-off and deductions allowed. Do not use last year's income unless the question says so.
3Choose the tax regime and rates given in the question (new regime by default for individuals, unless the old regime is stated). Compute tax on total income, apply rebate if eligible, then add surcharge and 4% cess.
4Deduct TDS and TCS on income included in the total. Do not deduct advance tax already paid when testing the ₹10,000 threshold.
5Compare the balance with ₹10,000. If it is less, state that no advance tax is payable and the balance is paid as self-assessment tax. Also check the senior citizen exemption: a resident individual aged 60 years or more at any time during the tax year with no business or profession income.
6If advance tax is payable, apply the cumulative percentages: 15%, 45%, 75%, 100%. For an assessee who declares profits under the presumptive scheme for eligible business or eligible profession, show one payment by 15 March.
7Show instalment amounts date by date and the incremental payment. Check that the instalments add up to the total.
8State the conclusion in one line, with the reason for liability or non-liability.

Quickest way: Threshold-first, then percentages

When to use it: Use this in MCQs and in the first two minutes of a written question, when you only need the amount or the liability decision.

Compute final tax with cess and subtract TDS in one line. If the result is under ₹10,000, stop: no advance tax.
Look for the two exits fast: a resident senior citizen with no business income, or an assessee under the presumptive scheme for eligible business or profession (one instalment on 15 March).
Otherwise multiply the net tax by 0.15, 0.45, 0.75 and 1.00. These are the cumulative targets.
For MCQs, the wrong options are usually the gross tax without TDS, or 25% per quarter. Eliminate both.
In written answers, write a small table-like list: date, cumulative %, cumulative amount, amount to pay. Give the final conclusion in a sentence.

Common mistakes in Advance Tax: Liability and Computation

Applying the ₹10,000 test to gross tax instead of tax after TDS/TCS.
Students compute tax and stop, forgetting that the test is on the net amount.
Fix: Always write 'Tax − TDS/TCS = net' first, then compare the net with ₹10,000.
Paying 25% of the tax in each quarter.
It feels natural to divide the year equally.
Fix: Learn the cumulative percentages 15, 45, 75, 100. The first instalment is 15%, the second adds 30%, the third adds 30% and the last adds 25%.
Exempting every senior citizen from advance tax.
Students remember the relief but not its condition.
Fix: The relief is for a resident individual aged 60 years or more at any time during the tax year with no business or profession income. A senior citizen with business income must pay advance tax.
Showing instalments for a presumptive taxpayer in four dates.
Students apply the general rule without checking the scheme.
Fix: For a taxpayer under the presumptive scheme for eligible business or profession, show a single payment on or before 15 March.
Computing advance tax on last year's income or on income already taxed at source in full.
Students mix up estimated income with the previous year's figures.
Fix: Use the estimate for the current tax year given in the question. Include all income, then give credit for TDS/TCS only once.
Forgetting health and education cess before the threshold test.
Cess is added at the end in regular computations and gets skipped.
Fix: Add 4% cess on tax plus surcharge before subtracting TDS. Then test the threshold.

Worked examples

Example 1

Mr. Rohan, a resident individual aged 40, is a salaried employee with estimated total income of ₹15,00,000 for tax year 2026-27 under the new regime. His employer is expected to deduct TDS of ₹80,000. He has no other tax credits. Compute his advance tax and show the instalments.

Show the solution

Tax on ₹15,00,000 under new regime slabs: ₹4,00,001 to ₹8,00,000 at 5% = ₹20,000; ₹8,00,001 to ₹12,00,000 at 10% = ₹40,000; ₹12,00,001 to ₹15,00,000 at 15% on ₹3,00,000 = ₹45,000.
Tax before cess = ₹20,000 + ₹40,000 + ₹45,000 = ₹1,05,000. The rebate does not apply because income exceeds ₹12,00,000.
Add 4% cess: ₹1,05,000 × 4% = ₹4,200. Total tax = ₹1,09,200.
Less: TDS ₹80,000. Net tax = ₹29,200.
₹29,200 is more than ₹10,000, so advance tax is payable.
By 15 June: 15% = ₹4,380. By 15 September: 45% = ₹13,140 cumulative, so pay ₹8,760 more. By 15 December: 75% = ₹21,900 cumulative, so pay ₹8,760 more. By 15 March: 100% = ₹29,200 cumulative, so pay ₹7,300 more.
Check: ₹4,380 + ₹8,760 + ₹8,760 + ₹7,300 = ₹29,200.

Answer: Advance tax payable is ₹29,200, paid as ₹4,380 (15 June), ₹8,760 (15 September), ₹8,760 (15 December) and ₹7,300 (15 March).

Example 2

Ms. Meera, a resident individual aged 35, runs an eligible business and declares her profits under the presumptive scheme for eligible business. Her estimated total income for tax year 2026-27 is ₹14,00,000 under the new regime. TDS of ₹13,600 will be deducted from her receipts. Is she liable to pay advance tax? If yes, how much and when?

Show the solution

Tax on ₹14,00,000: ₹4,00,001 to ₹8,00,000 at 5% = ₹20,000; ₹8,00,001 to ₹12,00,000 at 10% = ₹40,000; ₹12,00,001 to ₹14,00,000 at 15% on ₹2,00,000 = ₹30,000.
Tax before cess = ₹90,000. No rebate, since income exceeds ₹12,00,000, and no marginal relief, since the tax is far more than the income above ₹12,00,000.
Add 4% cess: ₹90,000 × 4% = ₹3,600. Total tax = ₹93,600.
Less: TDS ₹13,600. Net tax = ₹80,000.
₹80,000 is at least ₹10,000, so she is liable to pay advance tax.
The single-instalment rule is for an assessee who declares profits under the presumptive scheme for an eligible business (or an eligible profession). Meera declares her business profits under the presumptive scheme for eligible business, so she pays the entire amount in one instalment. The due date is on or before 15 March of the tax year.

Answer: Yes. Because she declares profits under the presumptive scheme for eligible business, advance tax of ₹80,000 is payable in a single instalment on or before 15 March 2027. Payment up to 31 March 2027 is also treated as advance tax.

Exam tips

Check for the two special cases before doing any arithmetic: a resident senior citizen without business income, and an assessee under the presumptive scheme for eligible business or profession. Questions often hide one of them in a single phrase.
Show cumulative percentages and the incremental payment separately. The examiner gives marks for both the due date and the amount.
State the ₹10,000 threshold test explicitly, even if the answer is obviously above it. A one-line test earns a step mark.
If the question has income that arises late, such as a capital gain in November, include it only in the instalments still due and say so.
In MCQs, watch for the traps: gross tax instead of net tax, equal quarterly instalments, and wrong exemption for senior citizens.

Practice questions from Tax Deduction or Collection at Source and Advance Tax

Advance Tax: Liability and Computation in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Advance Tax: Liability and Computation: frequently asked questions

Who is liable to pay advance tax?

Any assessee whose estimated tax for the tax year, after deducting TDS and TCS, is ₹10,000 or more. This covers individuals, HUFs, firms, companies and other persons. The main exemption is a resident individual who is a senior citizen (60 years or more at any time during the tax year) with no business or profession income.

What are the advance tax due dates and percentages?

For most assessees, 15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March. The percentages are cumulative on the total advance tax. An assessee who declares profits under the presumptive scheme for eligible business or eligible profession pays 100% in one instalment by 15 March.

Is a senior citizen always exempt from advance tax?

No. The relief is for a resident individual aged 60 years or more at any time during the tax year who has no income under the head business or profession. If a senior citizen has business or professional income, advance tax applies in the usual way.

How is TDS adjusted in advance tax computation?

Compute tax on estimated total income with cess, then subtract TDS and TCS on income included in that total. The balance is your advance tax, if it is ₹10,000 or more. Do not subtract advance tax already paid when you test the threshold.

What if I earn a capital gain after the due date of an instalment?

If a capital gain arises after an instalment date, include it in the remaining instalments. No interest for the earlier shortfall is charged if the tax on it is paid in the remaining instalments or by 31 March. The same relief applies where the shortfall is due to income in the nature of winnings from lotteries, crossword puzzles, races, games, gambling or betting. It does not cover other income that you simply failed to estimate. The detailed interest rules are covered under interest for default in advance tax.