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Direct and Indirect Taxation · Advance Tax

How to Compute Advance Tax Payable with Example

Updated 10 October 2026 · Fact-checked

Advance tax payable is your estimated tax for the current tax year, including cess, minus the TDS and TCS expected for the year. Estimate total income, compute tax at the applicable rates, deduct TDS and TCS, and if the balance is ₹10,000 or more, pay it in instalments by the due dates.

Understand Computation of Advance Tax Payable

Advance tax is tax paid during the tax year itself, as you earn, instead of in one lump sum after the year ends. The idea is pay-as-you-earn for incomes that have no full TDS, such as business profit, interest, rent and capital gains.

You do not wait for the final figure. You estimate the total income of the current tax year, compute tax on it as if you were filing the return, and then subtract the tax that others will already deduct or collect for you. What remains is the advance tax payable.

TDS (tax deducted at source) and TCS (tax collected at source) are credits. They reduce your liability because the tax is already with the government. The credit is for the TDS and TCS expected on the income and transactions of the same tax year.

Advance tax is needed only when the balance after TDS and TCS is ₹10,000 or more. A resident individual of age 60 or above who has no income from business or profession is not required to pay advance tax. If the balance is below ₹10,000, you simply pay the tax when you file the return.

The exam question usually gives income details, TDS and TCS, and asks for the advance tax payable and sometimes the instalment amounts. Treat it as a short computation with a fixed layout. Rates, rebate and due dates are covered in the related topics, so revise them alongside this one.

Key rules to remember

Advance tax payable
Advance tax payable = Estimated tax on current-year total income (including surcharge and cess) − TDS − TCS
TDS and TCS are those expected to be deducted or collected on income and transactions of the same tax year.
Liability threshold
Advance tax is payable only if the balance after TDS and TCS ≥ ₹10,000
If the balance is below ₹10,000, no advance tax is due. Exactly ₹10,000 is payable.
Cess
Health and education cess = 4% × (income-tax + surcharge)
Add it before deducting TDS and TCS.
Instalments for most assessees (cumulative)
By 15 June: 15% | by 15 September: 45% | by 15 December: 75% | by 15 March: 100%
Percentages are of the advance tax payable and are cumulative. The amount of each instalment is the difference from the previous cumulative figure.
Presumptive business assessees
Whole advance tax in one instalment on or before 15 March
This is for those who opt for the presumptive scheme for business. Check the instalment topic for the exact persons covered.
Individual new-regime slabs used in the examples
Up to ₹4,00,000: nil | ₹4,00,001–8,00,000: 5% | ₹8,00,001–12,00,000: 10% | ₹12,00,001–16,00,000: 15% | ₹16,00,001–20,00,000: 20% | ₹20,00,001–24,00,000: 25% | above ₹24,00,000: 30%
In the exam, use the rates given in the question or the rates in your tax-year 2026-27 material.

How to solve Computation of Advance Tax Payable questions

Use the same sequence for every advance tax problem. Show each step so you earn marks even if one figure goes wrong.

  1. 1Read the question for the assessee type, age, tax regime and the tax year. Note which incomes are estimated for the current year.
  2. 2Estimate income under each head: Salaries, House Property, Profits and Gains of Business or Profession, Capital Gains, Other Sources. Apply the usual deductions and set-offs for each head.
  3. 3Add the heads to get Gross Total Income. Deduct allowed Chapter deductions, if any, to reach estimated total income. Round it as the rules require.
  4. 4Compute tax at the applicable rates, including special rates for capital gains where relevant. Apply rebate if the conditions are met. Add surcharge if any, then add 4% cess.
  5. 5Deduct the TDS and TCS expected for the year. Use only credits that relate to this tax year's income.
  6. 6Compare the balance with ₹10,000. If it is below, state that no advance tax is payable. If it is ₹10,000 or more, that is the advance tax payable.
  7. 7If asked, split the amount into instalments using the cumulative percentages and the due dates. Check that the instalments add up to the total.

Quickest way: Single-column tax statement

When to use it: Use this when the question is short and gives most figures directly, so you need speed with a clear layout.

  1. Write one column: Estimated total income, Tax, Less rebate, Add cess, Tax liability, Less TDS, Less TCS, Advance tax payable.
  2. Compute tax by slab using the cumulative-tax shortcut: write the tax at the start of each slab, then add the rate on the excess.
  3. Subtract credits and test against ₹10,000 immediately.
  4. For instalments, multiply the total by 15%, 45% and 75% and take differences. The last instalment is the balance, so the sum is automatically correct.

Common mistakes in Computation of Advance Tax Payable

  • Deducting TDS and TCS before adding cess, or forgetting cess altogether.

    Students treat TDS as a deduction from income instead of a credit against tax.

    Fix: Always follow the order: tax, rebate, surcharge, cess, then subtract TDS and TCS.

  • Paying advance tax when the balance is below ₹10,000.

    The threshold is tested on the gross tax instead of the tax after TDS and TCS.

    Fix: Test the ₹10,000 limit on the balance after subtracting TDS and TCS.

  • Showing each instalment as 15%, 45%, 75% and 100% of the total instead of cumulative figures.

    The percentages are read as separate payments.

    Fix: Treat the percentages as cumulative. Pay only the difference at each date.

  • Ignoring the senior citizen exemption, or applying it to a senior with business income.

    The condition has two parts and students remember only the age.

    Fix: The exemption is for a resident individual of age 60 or above with no income from business or profession.

  • Taking TDS credit for tax deducted on income not included in the estimate.

    All TDS figures in the question are subtracted without checking.

    Fix: Match every TDS and TCS item to income or a transaction of the current tax year before deducting it.

  • Applying the rebate without checking the income limit, or applying it to the full tax.

    The rebate rule is remembered as a flat amount.

    Fix: Check that total income is within the rebate limit for the regime in your material, and take the lower of tax and the maximum rebate.

Worked examples

Example 1

Mr. Arvind Rao, a resident individual aged 40, estimates for the tax year 2026-27: gross salary ₹18,00,000 and bank interest ₹1,00,000. He is under the new regime with no other deductions. Take the standard deduction from salary as ₹75,000 (given for this question; in the exam, use the figure in your tax-year 2026-27 material). Use the slabs given in the key formulas. Expected TDS: on salary ₹1,40,000 and on interest ₹10,000. Expected TCS: ₹6,000. Compute the advance tax payable and the instalments.

Show the solution
  1. Income from salaries = ₹18,00,000 − ₹75,000 (standard deduction, as given) = ₹17,25,000.
  2. Income from other sources = ₹1,00,000. Estimated total income = ₹17,25,000 + ₹1,00,000 = ₹18,25,000.
  3. Tax: up to ₹4,00,000 nil. ₹4,00,001–8,00,000: 5% of ₹4,00,000 = ₹20,000. ₹8,00,001–12,00,000: 10% of ₹4,00,000 = ₹40,000. ₹12,00,001–16,00,000: 15% of ₹4,00,000 = ₹60,000. Balance ₹2,25,000 at 20% = ₹45,000. Total tax = ₹1,65,000.
  4. The rebate does not apply because income exceeds the rebate limit. Surcharge is nil as income is below ₹50 lakh.
  5. Cess = 4% × ₹1,65,000 = ₹6,600. Tax liability = ₹1,71,600.
  6. Less TDS (₹1,40,000 + ₹10,000) = ₹1,50,000 and TCS ₹6,000, total ₹1,56,000. Balance = ₹1,71,600 − ₹1,56,000 = ₹15,600.
  7. ₹15,600 is at least ₹10,000, so advance tax is payable.
  8. Instalments: by 15 June 15% = ₹2,340. By 15 September 45% = ₹7,020 cumulative, so ₹4,680. By 15 December 75% = ₹11,700 cumulative, so ₹4,680. By 15 March 100% = ₹15,600 cumulative, so ₹3,900. Check: 2,340 + 4,680 + 4,680 + 3,900 = ₹15,600.

Answer: Advance tax payable is ₹15,600, payable as ₹2,340 (15 June), ₹4,680 (15 September), ₹4,680 (15 December) and ₹3,900 (15 March).

Example 2

Ms. Kavita Menon, a resident individual aged 35, runs a consultancy (not under the presumptive scheme). Her estimated business income for the tax year 2026-27 is ₹13,00,000, with no other income and no deductions, under the new regime. Use the slabs given in the key formulas. Expected TDS on her professional fees is ₹60,000 and expected TCS is ₹8,000. Is advance tax payable? If yes, how much and when?

Show the solution
  1. Estimated total income = ₹13,00,000.
  2. Tax: ₹4,00,001–8,00,000: ₹20,000. ₹8,00,001–12,00,000: ₹40,000. Balance ₹1,00,000 at 15% = ₹15,000. Total tax = ₹75,000.
  3. The rebate applies only if total income is within ₹12,00,000. Her income is higher, so no rebate. Marginal relief matters only for income just above ₹12,00,000, and it limits the tax to the income in excess of ₹12,00,000. Here the excess is ₹1,00,000 and the tax of ₹75,000 is less than that excess, so the cap does not bite and no relief is due.
  4. Cess = 4% × ₹75,000 = ₹3,000. Tax liability = ₹78,000.
  5. Less TDS ₹60,000 and TCS ₹8,000 = ₹68,000. Balance = ₹78,000 − ₹68,000 = ₹10,000.
  6. The balance is exactly ₹10,000, so advance tax is payable.
  7. Instalments: 15 June: 15% = ₹1,500. 15 September: 45% = ₹4,500 cumulative, so ₹3,000. 15 December: 75% = ₹7,500 cumulative, so ₹3,000. 15 March: ₹10,000 cumulative, so ₹2,500. Check: 1,500 + 3,000 + 3,000 + 2,500 = ₹10,000.

Answer: Yes. Advance tax payable is ₹10,000, paid as ₹1,500, ₹3,000, ₹3,000 and ₹2,500 on the four due dates.

Exam tips

  • Always draw the final statement: tax, cess, TDS, TCS, balance, and the ₹10,000 test. Markers look for each line.
  • Write the instalments as cumulative percentages and show the difference. Show the total check at the end.
  • If the question says the assessee is a senior citizen, check for business income before saying no advance tax is due.
  • State the assumptions you make, such as the regime and that TDS relates to the same tax year. Assumptions earn marks where the question is silent.
  • In MCQs, test the ₹10,000 limit and the cumulative percentages first. Many wrong options are built on these two points.

Practice questions from Advance Tax

Computation of Advance Tax Payable in other exams

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

Computation of Advance Tax Payable: frequently asked questions

How do I compute advance tax with TDS and TCS?

Estimate total income for the current tax year and compute tax including surcharge and cess. Subtract the TDS and TCS expected for that year. If the balance is ₹10,000 or more, it is the advance tax payable.

Is advance tax payable if the balance is exactly ₹10,000?

Yes. The rule applies when the tax payable after TDS and TCS is ₹10,000 or more. Below ₹10,000 there is no liability to pay advance tax.

Who is not required to pay advance tax?

A resident individual aged 60 or above who has no income from business or profession need not pay advance tax. Others are covered when the balance reaches ₹10,000.

Do I round the instalment amounts?

Compute the total advance tax first, then work out the cumulative percentages. Follow the rounding instruction in the question or your study material. The last instalment is the balance, so the total always matches.