Computation of advance tax
[Section-405 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 405(1) of Income Tax Act 2025
405(1) The amount of advance tax payable by an assessee under section 404, on his own accord under section 406, or in pursuance of an order of an Assessing Officer under section 407, in the tax year shall, subject to the provisions of sub-section (2), be computed as under––
A = B-C
where,––
- A = the amount of advance tax payable in a tax year;
- B = income-tax on the specified sum calculated at the rates in force in the tax year, where “specified sum” shall have the meaning assigned to it in section 406 or 407;
- C = amount of income-tax which would be deductible or collectible at source during the said tax year under any provision of this Act from any income subject to the following:––
- (a) such income is computed before allowing any deduction admissible under this Act and has been taken into account in computing the specified sum; and
- (b) the person responsible for deducting tax has paid or credited such income after deduction of tax; or
- (c) the person responsible for collecting tax has received or debited such income after collection of tax.
Section 405(2) of Income Tax Act 2025
405(2) In the case of any class of assessees, where the Finance Act of the relevant year provides that, net agricultural income shall be taken into account for the purposes of computing advance tax, then,––
- 405(2)(a) for the purposes of order as mentioned in section 407(1) and (4), the net agricultural income shall be the amount that has been taken into account for the purposes of charging income-tax on the specified sum as mentioned in sub-sections (3) and (6) of the said section; or
- 405(2)(b) in any other situation, the net agricultural income as estimated by the assessee for the tax year.
FAQs on Section 405 of Income Tax Act 2025
What is the formula for computing advance tax under Section 405(1) of the Income Tax Act, 2025?
The advance tax payable is calculated using the formula A = B – C, where A is the amount of advance tax payable, B is the income-tax on the specified sum calculated at the applicable rates, and C is the amount of tax deductible or collectible at source during the tax year on specified incomes.
What does the term “specified sum” refer to in the context of Section 405?
The “specified sum” refers to the meaning assigned to it in Sections 406 and 407, and it forms the basis for calculating the income-tax (component B) for advance tax computation.
How is the component ‘C’ (TDS/TCS adjustment) determined for advance tax purposes?
‘C’ includes the income-tax deductible or collectible at source from income that meets the following conditions: (a) income computed before any deduction under the Act and included in the specified sum, and (b) such income has been paid or credited (for TDS) or received or debited (for TCS) after appropriate deduction or collection of tax.
Is deduction of tax mandatory for reducing the advance tax liability under Section 405(1)?
Yes, the income must be actually subjected to deduction or collection of tax and must also have been paid, credited, received, or debited as required, for it to be reduced from the advance tax liability.
Does Section 405(2) require inclusion of agricultural income for certain assessees?
Yes, where the Finance Act for a given year mandates, the net agricultural income shall be considered for advance tax computation for certain classes of assessees.
How is net agricultural income considered under Section 405(2)(a) for AO’s order under Section 407?
For orders under Section 407(1) and (4), the net agricultural income is the amount used in computing tax on the specified sum under sub-sections (3) and (6) of Section 407.
How is net agricultural income treated under Section 405(2)(b) in cases other than orders under Section 407?
In all other situations, the assessee may estimate the net agricultural income for the tax year and use it for computing their advance tax.
Does inclusion of agricultural income affect only specific classes of assessees?
Yes, only those classes of assessees for whom the Finance Act explicitly provides for such inclusion are required to take agricultural income into account while computing advance tax.
What is the role of Section 404 in relation to Section 405?
Section 404 specifies the liability to pay advance tax. Section 405 then provides the manner of computing the amount of such advance tax.
How does self-assessment under Section 406 interact with computation under Section 405?
If advance tax is paid by the assessee voluntarily under Section 406, the amount payable is still computed using the formula provided under Section 405.
Does an Assessing Officer’s order under Section 407 override the self-assessment computation under Section 405?
No, even when the Assessing Officer issues an order under Section 407, the computation of advance tax must follow the same formula and structure laid down in Section 405.
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