Advance tax is essentially 'pay as you earn' — instead of dumping your entire year's tax liability on the government on March 31st, you pay it in instalments throughout the financial year. Section 208 answers the most basic question: who actually has to pay advance tax?
The rule is beautifully simple: if your estimated advance tax liability for the financial year is ₹10,000 or more, you are legally required to pay advance tax. That's it. The ₹10,000 threshold is the trigger. Below it? You're off the hook — pay the full amount via self-assessment tax after March 31st and you're fine. But cross that threshold, even by ₹1, and you must follow the advance tax instalment schedule under Section 211.
Now, who computes this ₹10,000 figure? You do — it's based on your estimated total income for the year minus any TDS already deducted and tax credits (like 87A relief). So if Mr. Sharma is a freelance consultant expecting ₹8 lakh income this year, and his estimated tax comes to ₹63,000, and his clients will deduct ₹20,000 as TDS — his advance tax liability is ₹43,000. That's well above ₹10,000, so Section 208 kicks in and he must pay advance tax. One important carve-out: senior citizens (aged 60+) who do NOT have income from business or profession are fully exempt from advance tax under Section 207 — Section 208 simply doesn't apply to them. This is a classic exam trap. For everyone else — salaried individuals with side income, freelancers, business owners, companies — the ₹10,000 rule applies uniformly. This is asked frequently as a 2-4 mark theory or MCQ question, especially in the context of 'who is liable' and the interplay with Section 207.