NISM-Series-X-B: Investment Adviser (Level 2) · Concepts in Taxation

TDS, Advance Tax and Return Filing for NISM X-B

Updated 11 October 2026

TDS is tax deducted by the payer at source and deposited with the government. Advance tax is tax you pay in instalments during the year when your liability is ₹10,000 or more after TDS. Returns are filed after the year ends. Late payment attracts interest; late filing attracts a fee.

Understand TDS, Advance Tax and Return Filing

Income tax is meant to be collected as income is earned, not in one lump sum after the year ends. Three tools make this work: TDS, advance tax and the return of income.

TDS (tax deducted at source): the person paying you certain income, such as salary, interest, commission or professional fees, deducts tax at a prescribed rate before paying. The payer deposits it with the government and gives you a certificate (Form 16 for salary, Form 16A for other income). The deducted tax is credited to your PAN and shows in Form 26AS and the Annual Information Statement (AIS). You claim it as credit when you file your return.

TCS (tax collected at source) is the mirror image. The seller collects extra tax from the buyer at the time of sale of specified goods or services, and the buyer gets credit. TDS is deducted by the payer from a payment made. TCS is collected by the receiver of the money from the buyer.

Advance tax applies when TDS does not cover your full tax. If your estimated tax liability for the year, after reducing TDS, is ₹10,000 or more, you must pay it in instalments during the year itself. This suits income such as capital gains, rent, business income and interest where little or no tax is deducted. A resident senior citizen (age 60 or more) with no business or professional income is exempt from advance tax.

PAN (Permanent Account Number) is the ten-character identifier that links all your tax credits and payments. If you do not give your PAN to the deductor, TDS is deducted at the highest of (a) the rate specified in the Act, (b) the rate in force, or (c) 20%. A lower rate of 5% applies for a few specified payments, such as those under Sections 194-O and 194Q. If the normal rate is already higher than 20%, the higher rate applies, so 20% is not a fixed minimum in every case.

Return filing: after the year ends, you report total income, claim TDS and advance tax already paid, and pay any balance (self-assessment tax) or claim a refund. Late payment of tax attracts interest. Late filing attracts a fee and possible loss of the right to carry forward certain losses.

Key formulas to remember

Advance tax threshold: Net tax liability (after TDS) ≥ ₹10,000 → advance tax payable; Below ₹10,000 no advance tax is due. Resident senior citizens without business or professional income are exempt.
Advance tax instalments (non-presumptive taxpayers): At least 15% by 15 June | at least 45% by 15 September | at least 75% by 15 December | 100% by 15 March (all cumulative); These are minimum cumulative percentages of the year's tax, not per instalment. So the September instalment alone is at least 30%.
Presumptive taxation (Section 44AD / 44ADA): Whole advance tax in one instalment by 15 March; Applies to taxpayers who opt for presumptive income under these schemes.
Interest on advance tax shortfall (Section 234B / 234C): Section 234B: 1% per month or part of a month on the amount of assessed tax less advance tax paid and TDS | Section 234C: 1% per month for 3 months on the shortfall of the June, September and December instalments, and 1 month on the shortfall of the March instalment; 234B applies if advance tax paid is below 90% of assessed tax. It runs from 1 April of the assessment year to the date of payment or determination of tax. 234C applies to shortfall in instalments, and its months are fixed as stated, not counted by part months. Under 234C there is no interest on a shortfall caused by capital gains or dividend income that arose after the due date of an instalment, if the tax is paid in the remaining instalments.
Interest for late filing of return: Section 234A: 1% per month or part of a month on tax remaining unpaid after TDS and advance tax; Runs from the due date until the date of filing.
Late fee for belated return: Section 234F: ₹5,000 (₹1,000 if total income is up to ₹5 lakh); Applies when the return is filed after the due date, whether or not any tax is payable.
Return due dates: 31 July: individuals not requiring audit | 31 October: assessees whose accounts require audit (including partners of a firm whose accounts require audit) | 30 November: assessees who must furnish a transfer pricing report under Section 92E; The deadline for a belated or revised return is 31 December of the assessment year. An updated return is a separate facility and is not the same as a belated return.
TDS vs TCS: TDS = deducted by payer from payment | TCS = collected by seller from buyer; Both are credited to the PAN holder and adjusted against final tax.

How to solve TDS, Advance Tax and Return Filing questions

Most questions on this topic ask for a rule, a date, a rate or who is liable. Use this method to reach the answer without being thrown by the options.

1Identify what is being tested: TDS, TCS, advance tax, return filing, interest or penalty.
2Note the taxpayer type: resident or non-resident, senior citizen or not, salaried, business, presumptive taxpayer, or audit case.
3For advance tax, compute estimated tax liability, subtract TDS, and check if the balance is ₹10,000 or more.
4Apply the cumulative percentage for the relevant date: 15%, 45%, 75%, 100%.
5For interest under 234A and 234B, count months at 1% per month, with a part of a month counted as a full month. Under 234C, use 3 months for the June, September and December shortfalls and 1 month for the March shortfall.
6For filing, match the taxpayer to the due date: 31 July, 31 October or 30 November.
7Eliminate options that mix up TDS with TCS, or per-instalment with cumulative percentages.
8Re-read the question for words like 'at least', 'not later than' and 'cumulative'.

Quickest way: Date and percentage ladder

When to use it: Use this for any question on advance tax instalments or return due dates when time is short.

Memorise the ladder 15-45-75-100 against Jun-Sep-Dec-Mar, each on the 15th.
For an instalment amount, subtract the previous cumulative percentage from the current one.
Check the ₹10,000 threshold first. If the net liability is lower, the answer is no advance tax.
Memorise the 31 July, 31 October and 30 November due dates for filing.
Interest under 234A and 234B is 1% per month, with part months counted as full. Under 234C it is 1% for 3 months on the first three instalments and 1 month on the March instalment.

Common mistakes in TDS, Advance Tax and Return Filing

Treating advance tax percentages as separate amounts per instalment.
The numbers 15, 45, 75, 100 look like individual shares that add up to more than 100.
Fix: They are cumulative. Instalments are 15%, 30%, 30% and 25% of the year's tax.
Applying the ₹10,000 threshold to total tax instead of tax after TDS.
Students forget TDS already paid reduces the advance tax liability.
Fix: Always compute estimated tax minus TDS first, then compare with ₹10,000.
Confusing TDS with TCS.
Both are 'at source' and the names look similar.
Fix: TDS is deducted by the payer from a payment. TCS is collected by the seller from the buyer on top of the sale price.
Saying all senior citizens are exempt from advance tax.
The exemption is remembered without its conditions.
Fix: The exemption is for resident individuals aged 60 or more with no income from business or profession.
Giving 31 July as the due date for every individual.
It is the most common date, so students assume it is universal.
Fix: 31 July applies to individuals not subject to audit. Those whose accounts require audit file by 31 October.
Counting interest only for full months, or applying part-month counting to every section.
Students apply ordinary monthly interest logic, or assume all three sections work the same way.
Fix: Under Sections 234A and 234B a part of a month is counted as a full month. Under 234C the months are fixed: 3 months for the June, September and December shortfalls and 1 month for the March shortfall.

Worked examples

Example 1

Mr. Rao, a resident aged 40 with no business income, estimates his tax for the year at ₹80,000. TDS of ₹30,000 has been deducted on his salary. What is the cumulative advance tax he must have paid by 15 December, and the instalment payable on 15 September?

Show the solution

Net liability = ₹80,000 − ₹30,000 = ₹50,000.
This is above ₹10,000, so advance tax is payable.
Cumulative by 15 September = 45% of ₹50,000 = ₹22,500.
Cumulative by 15 June = 15% of ₹50,000 = ₹7,500.
The September instalment alone = ₹22,500 − ₹7,500 = ₹15,000.
Cumulative by 15 December = 75% of ₹50,000 = ₹37,500.

Answer: Cumulative by 15 December is ₹37,500, and the instalment payable on 15 September is ₹15,000.

Example 2

Ms. Iyer, a resident individual aged 35 with no business income, has an estimated tax liability of ₹44,000. TDS of ₹36,000 has been deducted on her interest income. Is she liable to pay advance tax? Also, by what date should she file her return to avoid a late fee?

Show the solution

Net liability = ₹44,000 − ₹36,000 = ₹8,000.
The threshold is ₹10,000 or more. ₹8,000 is below it.
So she does not need to pay advance tax.
She still has to pay the ₹8,000 as self-assessment tax before filing the return.
As an individual not requiring audit, her due date is 31 July of the assessment year.

Answer: She is not liable for advance tax because net liability is ₹8,000, below ₹10,000. She should file by 31 July to avoid the late fee.

Exam tips

Expect direct recall questions on dates, the ₹10,000 threshold and cumulative percentages. Learn them cold.
Watch for trap options that give per-instalment percentages instead of cumulative ones.
If a question mentions a senior citizen, check for business income before applying the exemption.
On a 2-mark question a wrong answer costs more under negative marking, so skip rather than guess between two close options.
Read TDS versus TCS questions slowly. Ask who is paying and who is receiving.

Practice questions from Concepts in Taxation

TDS, Advance Tax and Return Filing: frequently asked questions

How does TDS work in India?

The payer deducts tax at the prescribed rate from specified payments such as salary or interest and deposits it with the government. The amount is credited to your PAN and appears in Form 26AS and AIS. You claim it as credit when filing your return.

Who must pay advance tax and what are the due dates?

Anyone whose tax liability after TDS is ₹10,000 or more must pay it. Resident senior citizens without business income are exempt. The instalments are due on 15 June (15%), 15 September (45%), 15 December (75%) and 15 March (100%), cumulatively.

What is the difference between TDS and TCS?

TDS is deducted by the payer from a payment made to you. TCS is collected by the seller from the buyer when specified goods or services are sold. In both cases the amount is credited to the PAN of the person it was taken from.

What happens if I file my income tax return late?

You pay interest under Section 234A at 1% per month or part of a month on tax remaining unpaid after TDS and advance tax. You also pay a late fee under Section 234F, which is ₹5,000, or ₹1,000 if total income is up to ₹5 lakh, even if no tax is payable. A belated return can be filed up to 31 December of the assessment year, and some losses may not be carried forward.