Chapter XIX - Collection and Recovery of Tax
Section 405
Section 405: computation of advance tax
Section 405 gives the exact formula used to work out advance tax, whether it is being paid voluntarily by the assessee (Section 406) or in pursuance of an Assessing Officer's order (Section 407), and explains how net agricultural income is factored in where the Finance Act requires it.
On this page
Need advice on Section 405?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(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 financial 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 financial year; B = income-tax on the specified sum calculated at the rates in force in the financial 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 financial 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) (i) the person responsible for deducting tax has paid or credited such income after deduction of tax; or (ii) the person responsible for collecting tax has received or debited such income after collection of tax.
(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,— (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 (b) in any other situation, the net agricultural income as estimated by the assessee for the tax year.
Introduction
Section 405 computes advance tax as income-tax on the specified sum at the rates in force, less the eligible tax deductible or collectible at source during the financial year.
The TDS or TCS reduction is subject to the precise conditions in the section. The specified sum is defined by section 406 or 407, depending on whether payment is self-estimated or follows an Assessing Officer order.
Key takeaways
Core formula
Advance tax payable is tax on the specified sum minus qualifying deductible or collectible tax.
TDS/TCS offset is conditional
The income must be included in the specified sum and the statutory deduction or collection conditions must be met.
Two possible specified sums
Read section 406 for self-estimated payment and section 407 for an order-based payment.
Agricultural-income adjustment
Where the Finance Act of the year requires net agricultural income to be considered, subsection (2) specifies the estimate or amount to use.
Start with the specified sum
Section 405 uses A = B − C. B is the income-tax on the specified sum at the rates in force for the financial year. Section 406 defines the specified sum for self-estimated advance tax; section 407 defines it when an Assessing Officer orders payment.
When TDS or TCS reduces advance tax
C is tax that would be deductible or collectible at source during the financial year from income included in the specified sum before admissible deductions. The statutory condition also looks to actual payment or credit after deduction, or receipt or debit after collection. Check both conditions before subtracting C.
Apply the formula to the instalments
A is the advance tax payable for the financial year under section 404, through self-payment under section 406 or an Assessing Officer order under section 407. Section 408 supplies instalment dates and percentages; section 405 itself supplies the computation rather than those dates.
Net agricultural income where required
Where the relevant Finance Act requires net agricultural income to be taken into account, an order under section 407(1) or (4) uses the amount considered for charging tax on its specified sum. In other cases, the assessee uses the net agricultural income estimated for the tax year.
Step-by-step flow for applying Section 405
- 1
Determine the specified sum
Your own estimate of current income under Section 406, or the figure in an Assessing Officer's order under Section 407.
- 2
Compute income-tax on it at the rates in force for the financial year (B)
- 3
Work out the TDS/TCS that will be deducted or collected during the year (C)
Count only income included in the specified sum (computed before deductions) that the payer has paid or credited after deducting tax, or the collector has received or debited after collecting tax.
- 4
Advance tax payable A = B - C
Where the Finance Act requires, include net agricultural income as Section 405(2) explains. Then check Section 404's ₹10,000 condition and pay in instalments under Section 408.
Practical checklist
Do
- Document the specified sum and rates used for the financial year.
- Reconcile expected tax deduction or collection against the conditions in section 405 before reducing advance tax.
Avoid
- Do not subtract a theoretical TDS/TCS amount without checking the statutory conditions.
Illustrative example
Worked example: consultant with partial TDS
Hypothetical facts (illustration only, not a real taxpayer): A consultant estimates current income for the year, and tax on it at the rates in force works out to ₹3,00,000. Her clients will deduct ₹1,20,000 as TDS from fees already included in that estimate.
B
Tax on the specified sum = ₹3,00,000.
C
TDS on income included in the specified sum = ₹1,20,000.
A
Advance tax = ₹3,00,000 - ₹1,20,000 = ₹1,80,000.
Outcome
- ₹1,80,000 is payable as advance tax, which is above ₹10,000, so Section 404 applies.
- She pays it in the Section 408 instalments and may revise later instalments if her estimate changes (Section 406(2)).
Glossary
- Specified sum
- The income on which advance tax is computed: the assessee's own estimate under Section 406, or the figure in an order under Section 407.
- B in the formula
- Income-tax on the specified sum at the rates in force in the financial year.
- C in the formula
- TDS or TCS deductible or collectible during the financial year on income included in the specified sum, subject to the conditions in Section 405(1).
Frequently asked questions
What is the formula for computing advance tax?
A = B - C, where B is income-tax on the specified sum at the rates in force for the financial year, and C is the tax that would be deductible or collectible at source on the relevant income during that year.
Does TDS already deducted reduce the advance tax payable?
Yes - the formula subtracts (C) the tax deductible/collectible at source on the income already factored into the specified sum, so an assessee is not asked to pay advance tax on income where TDS/TCS will separately apply.
Can I reduce advance tax for TDS that a client has not yet deducted?
Section 405(1) counts TDS only where the payer has paid or credited the income after deducting tax (or the collector has received or debited the amount after collecting tax), and the income has been included in the specified sum. Check each item against those conditions before reducing advance tax.
Need help applying this provision to your situation?
Get help computing your advance tax liabilityLast updated 9 October 2026