Advance Tax is the tax paid in advance during the financial year, instead of a lump sum payment at the end of the year. It is calculated based on the estimated income of the taxpayer for that financial year.

If the tax liability exceeds ₹ 10,000 in the year for which the return is being filed, the taxpayer is required to pay advance tax for the said assessment year. The liability for payment of advance tax does not arise if an Individual does not have any income arising from Profits and Gains of Business or Profession and is of the age of Sixty years or more at any time during the previous year.

The manner of computation of advance tax is defined in Section 209 of the Income Tax Act. The Advance tax liability shall be computed in the following manner:

• Estimate the Total Income for the Financial Year and deduct the eligible allowances, exemptions and deductions from the Gross Total Income.
• Calculate the tax liability based on the rates in force for the said Financial year.
• Deduct the tax deducted or collected at source by various deductors to arrive at the final tax liability.

The advance tax liability is to be paid in four instalments as mentioned hereunder :