Section 404 of the Income-tax Act, 2025 — Conditions of Liability to Pay Advance Tax (₹10,000 Threshold)

In plain language

What Section 404 actually says

Section 404 of the Income-tax Act, 2025 lays down the single most important gateway rule for advance tax: you are liable to pay advance tax only if your total tax payable for the tax year, computed under the advance-tax provisions, works out to ₹10,000 or more. If your net tax liability is below ₹10,000, you have no obligation to pay tax in instalments during the year — you simply pay it (if any) as self-assessment tax when you file your return.

This section is the 2025 Act's re-enactment of the old Section 208 of the Income-tax Act, 1961. The wording has been modernised and simplified, but the core policy — the ₹10,000 trigger — is unchanged. Section 404 works together with the charging section (403), the computation section (405) and the instalment/due-date section (408) to form the complete advance-tax code.

How the ₹10,000 figure is calculated

The ₹10,000 is not your gross tax. It is your net tax liability after subtracting the tax that will already be collected on your behalf. In practice you:

• Estimate your total income for the whole tax year (salary, business, capital gains, interest, rent, etc.).
• Compute tax on it at the rates in force (new regime by default under the 2025 Act), add surcharge and cess.
• Subtract TDS and TCS that has been or will be deducted/collected, plus any reliefs and tax credits available (Section 405 governs this computation).
• If the balance is ₹10,000 or more, Section 404 is triggered and advance tax becomes payable.

Who it applies to

The liability under Section 404 is broad. It covers every category of assessee whose net tax crosses the threshold:

• Salaried individuals who have extra income (interest, capital gains, rent, freelance income) on which enough TDS is not deducted.
• Self-employed professionals, freelancers and consultants.
• Businesses, firms, LLPs and companies.
• Non-residents with taxable Indian income.
• Presumptive-scheme taxpayers (Section 58 business / professional presumptive income) — though they pay the whole amount in one shot by 15 March under Section 408(2).

The senior-citizen exemption

A resident senior citizen (aged 60 or above) who does NOT have any income from business or profession is exempt from paying advance tax, even if the tax works out above ₹10,000. This continuity from the old Section 207(2)/208 protects retirees living on pension, interest and rental income from the compliance burden of instalments. (Note: some commentators place this carve-out under Section 405; the exemption itself is well established regardless of the exact clause numbering — confirm against the bare Act.)

How it interacts with related sections

• Section 403 is the charge — it says advance tax "shall be payable" on current income; Section 404 then sets the condition (₹10,000) for that charge to bite.
• Section 405 tells you how to compute the advance tax after netting TDS/TCS and reliefs.
• Section 408 fixes the four due dates and the 15% / 45% / 75% / 100% cumulative instalment pattern.
• Sections 424 and 425 charge interest at 1% per month for short-payment / deferment if you were liable but did not pay correctly.

Practical implications

Section 404 is what decides whether the interest provisions (424/425) can ever apply to you. If you stay below ₹10,000 net tax, no advance-tax interest can be levied. The moment you cross it, missing instalments starts a 1%-per-month interest meter. The most common trap is a salaried person who sells shares/property or earns large interest income mid-year: their salary TDS is fine, but the extra income pushes net tax past ₹10,000 and triggers advance-tax liability they never expected.