Sections 207 and 208 of Income Tax Act: Liability to Pay Advance Tax

Advance tax is income-tax paid during the year in which income is earned instead of waiting until the return is filed. Under the Income-tax Act, 1961, Sections 207 and 208 established the basic liability and monetary threshold. The new Income-tax Act, 2025 preserves the advance-tax framework while reorganising the provisions.

Section 207: Liability for payment of advance tax

Section 207(1) of the Income-tax Act, 1961 provided that tax was payable in advance during a financial year, in accordance with Sections 208 to 219, on the assessee's total income chargeable to tax for the assessment year immediately following that financial year. The estimated income for this purpose was referred to as current income.

Senior citizen exemption under Section 207(2)

A resident individual who was 60 years of age or more at any time during the relevant previous year was not liable to pay advance tax under Section 207 if the individual did not have income chargeable under the head "Profits and gains of business or profession". Thus, the exemption depended both on residential status and absence of business or professional income.

Section 208: Rs. 10,000 advance tax threshold

Section 208 of the Income-tax Act, 1961 required advance tax to be paid where the amount of advance tax payable during the financial year, computed in accordance with the advance-tax provisions, was Rs. 10,000 or more. The Income-tax Act, 2025 retains the same Rs. 10,000 threshold in Section 404.

Advance tax under the Income-tax Act, 2025

For Tax Year 2026-27 onwards, the new Act applies. Section 404 states the threshold for liability, Section 405 provides the computation formula, and the succeeding provisions deal with payment by the assessee, orders of the Assessing Officer and instalments. The Income Tax Department has confirmed that there is no policy change in the basic advance-tax framework merely because of the transition to the 2025 Act.

Advance tax instalments

Special instalment rules apply to eligible assessees using specified presumptive taxation provisions. Under the Income-tax Act, 2025, an assessee covered by the relevant presumptive scheme generally pays the entire advance-tax liability on or before 15 March.

How advance tax is computed

Broadly, the taxpayer estimates income for the tax year, computes income-tax at the applicable rates, and reduces eligible tax credits such as TDS and TCS in accordance with the statutory formula. The balance determines the advance-tax liability. Section 405 of the Income-tax Act, 2025 expressly provides the computation framework.

Interest for default or deferment

Failure to pay sufficient advance tax or delay in paying prescribed instalments can attract interest. For the new Act, Section 424 corresponds to the earlier Section 234B framework for failure to pay sufficient advance tax, while Section 425 deals with deferment of advance-tax instalments corresponding to Section 234C. The Income Tax Department states that the interest rates remain unchanged under the 2025 Act.

Which Act applies during the transition?

Practical points

• Estimate total taxable income and the resulting tax liability during the tax year.
• Check whether advance tax payable is Rs. 10,000 or more after applying the statutory computation.
• Consider the exemption applicable to a qualifying resident senior citizen without business or professional income.
• Pay the required cumulative percentage by each applicable instalment date.
• Revise the estimate during the year if income materially changes.
• Use the Income-tax Act, 2025 for advance tax relating to Tax Year 2026-27 onwards.

Official Income Tax resources

For current payment rules and transition guidance, refer to the Income Tax Department Tax Payments guidance, the Income Tax e-Filing Portal and the Income-tax Rules, 2026.