Section 405 Income Tax Act 2025: How Is Advance Tax Calculated?
Section 405 sets out the statutory formula for computing advance income-tax, including the deduction of eligible tax deducted or collected at source and special treatment of net agricultural income where applicable.
Updated: 12 November 2026 | Income-tax Act, 2025, Chapter XIX, Part C
What does Section 405 provide?
Section 405 prescribes how an assessee calculates the advance tax payable for a financial year. It covers advance tax payable under the threshold rule in Section 404, voluntary payment under Section 406 and payment pursuant to an Assessing Officer's order under Section 407. The computation takes account of tax at the applicable rates and qualifying tax deducted or collected at source.
Section 405 corresponds broadly to the computation rules previously contained in Section 209 of the Income-tax Act, 1961. The Income Tax Department states that the 2025 Act introduces a clearer formula without a policy change in advance-tax payment rules.
Section 405(1): How to compute advance tax
A = B - C
A = advance tax payable in the financial year;
B = income-tax on the specified sum, calculated at the rates in force in that financial year;
C = qualifying income-tax deductible or collectible at source during that financial year, subject to the conditions in Section 405(1).
The specified sum is determined under Section 406 when the assessee computes advance tax on their own accord, or under Section 407 when an Assessing Officer makes the relevant order. This formula determines the net advance-tax liability, not merely the gross income-tax on estimated income.
Relevant statutory expressions and definitions
Income-tax paid during the financial year in accordance with the advance-tax provisions, before final determination of tax through the return and assessment process.
Under Section 403(2), the total income of the assessee chargeable to tax for the relevant tax year.
The amount forming the basis for computation of income-tax under Section 405(1)(B), with its meaning supplied by Section 406 or Section 407, depending on the mode of payment or order.
The income-tax rates applicable for the relevant financial year, taking into account the applicable Finance Act and other relevant provisions.
Income-tax required to be withheld by a person responsible for paying or crediting specified income, under the applicable provisions of the Act.
Income-tax required to be collected by a person responsible for specified receipts or transactions, under the applicable provisions of the Act.
When can TDS or TCS reduce advance tax?
Section 405(1)(C) allows a reduction for tax deductible or collectible at source only where the income is included in the specified sum and is computed before allowing deductions admissible under the Act. The provision additionally requires the relevant income to have been paid or credited after deduction of tax, or received or debited after collection of tax, as applicable.
Important: A merely expected deduction or collection cannot automatically be subtracted if the payer has paid or credited the income without deducting tax, or the collecting person has received or debited the income without collecting tax. The statutory conditions must be verified for the relevant income.
Section 405(2): How is net agricultural income treated?
Where the relevant Finance Act requires net agricultural income to be taken into account for computing advance tax for a class of assessees, Section 405(2) specifies the amount to use:
- Assessing Officer's order under Section 407(1) or (4): use the net agricultural income taken into account for charging income-tax on the specified sum under Section 407(3) or (6), respectively.
- Other cases: use the net agricultural income estimated by the assessee for the tax year.
This does not mean agricultural income is itself invariably taxable. Its inclusion for rate computation depends on the Finance Act and the assessee's circumstances.
Example: Advance-tax computation under Section 405
Assume the tax on the specified sum, calculated at the applicable rates, is Rs. 85,000 and qualifying TDS/TCS meeting Section 405 conditions is Rs. 25,000.
B (tax on specified sum): Rs. 85,000
C (qualifying TDS/TCS): Rs. 25,000
A (advance tax payable): Rs. 60,000
This is an illustration of the formula only. It does not calculate tax rates, surcharge, cess, instalment deadlines, interest or adjustments arising from changes in estimated income. Actual liability must be worked out for the applicable tax year and taxpayer category.
Frequently asked questions
What is the formula under Section 405?
Advance tax payable equals income-tax on the specified sum at the rates in force, minus qualifying TDS/TCS, subject to the statutory conditions: A = B - C.
Can I deduct all expected TDS from my advance-tax calculation?
Not necessarily. The deduction must meet the conditions of Section 405(1)(C), including the requirements concerning the income and the actual deduction or collection.
Does Section 405 itself prescribe advance-tax due dates?
No. Section 405 deals with computation; instalments and due dates are addressed in Section 408.
What if the computed advance tax is less than Rs. 10,000?
Section 404 sets a threshold of Rs. 10,000 for liability to pay advance tax under this Part, subject to the applicable statutory framework.
Is Section 405 the same as Section 209 of the 1961 Act?
Section 405 is the corresponding computation provision under the 2025 Act. The drafting has been simplified, including an explicit formula, but transitional matters must be assessed under the legislation applicable to the relevant tax year.
Official statutory references
Read the current statute and Finance Act for the relevant year before applying the provisions to a particular case.