Advance Tax - Liability for Payment [Sections 207 & 208]
# Advance Payment of Tax — Sections 207 & 208
## Basic Charge — Section 207
Tax shall be payable in advance during any F.Y. in respect of the total income of the assessee which would be chargeable to tax for the A.Y. immediately following that F.Y.
## Liability Threshold — Section 208
Advance tax is payable when the amount of tax liability for the year is ₹10,000 or more (after TDS/TCS adjustment).
## Conceptual Framework
Advance tax = 'pay-as-you-earn' principle.
It's an estimated liability paid in installments during the F.Y. itself.
Final reconciliation happens at the end of the year (when filing return).
## Exemption for Senior Citizens
A resident senior citizen (age ≥ 60) who does NOT have any income from business or profession is NOT liable to pay advance tax (section 207(2)).
## Computation Flow
1. Estimate total income for the F.Y.
2. Compute tax thereon at applicable rates.
3. Add surcharge & cess.
4. Reduce by TDS, TCS, and any tax relief/credit available.
5. If net liability ≥ ₹10,000 → Pay advance tax in installments.
Worked example
### Example 1
Example: Mr. A (age 45) estimates his total income for FY 2025-26 at ₹8,00,000, with TDS of ₹5,000. His estimated tax = ₹40,000.
Net liability = 40,000 − 5,000 = ₹35,000 ≥ ₹10,000
He must pay advance tax.
### Example 2
Example: Mr. B (age 65, resident, only pension and FD interest, no business income) estimates tax liability of ₹50,000.
Senior citizen with no business/profession income → No advance tax liability (Sec 207(2)).
⚠️ Common exam mistakes
Forgetting to reduce TDS / TCS before checking the ₹10,000 threshold.
Applying senior citizen exemption to a senior with business income — exemption requires NO business or profession income.
Treating ₹10,000 as a tax computed before relief; it's after considering credits and reliefs.
Bare-Act text Sections 207 & 208 · Income-tax Act, 1961 · click to expand
Section 207: Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219 (both inclusive), in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as 'current income'. Section 208: Advance tax shall be payable during a financial year in every case where the amount of such tax payable by the assessee during that year, as computed in accordance with the provisions of this Chapter, is ten thousand rupees or more.