CHAPTER XVII - COLLECTION AND RECOVERY OF TAX - C.-ADVANCE PAYMENT OF TAX
CHAPTER XVII - COLLECTION AND RECOVERY OF TAX - C.-ADVANCE PAYMENT OF TAX
Section 207 - Liability for Payment of Advance Tax
Case Laws & Commentary - Income-tax Act, 1961 (as amended by the Finance Act, 2026) - bharattax.co Treatise
Status: Live. The charging provision of the advance-tax code ("pay-as-you-earn").
Finance Act, 2026: No amendment. (The annual First Schedule rate-tables govern the rate at which advance tax is computed but operate around - not upon - section 207.)
Mechanism: Tax is payable in advance during the financial year on the assessee's "current income" (the total income chargeable for the next assessment year), computed under sections 208-219; resident senior citizens without business income are exempt (sub-section (2)).
Litigation profile: Foundational rather than heavily litigated on its own text; disputes migrate to sections 209, 214 and the successor interest sections 234B/234C.
A. SECTION COMMENTARY
Section 207 is the charging provision of the advance-tax code. It enacts the "pay-as-you-earn" principle in direct taxation: tax on the income of a financial year is to be paid, in substance, during that very year and not deferred to the assessment that follows. Sub-section (1) makes tax "payable in advance during any financial year, in accordance with the provisions of sections 208 to 219", in respect of the total income that would be chargeable for the assessment year immediately following - an income the section labels, for the rest of the Chapter, as the "current income". Advance tax is therefore a provisional collection against a liability that is finally quantified only on regular assessment; the sums paid are not the assessee's tax as such but a credit towards it, given effect by section 219.
The architecture of the modern Chapter
The present scheme is the product of the Direct Tax Laws (Amendment) Act, 1987 (w.e.f. 1 April 1988), which recast the whole Chapter. The earlier machinery - in which the assessee filed estimates and statements (sections 209A, 212, 213) and bore interest for shortfalls under sections 215 to 217 while the Government paid interest under section 214 - was dismantled. In its place came a self-operating model: the assessee computes and pays advance tax of his own accord under section 210(1), the Assessing Officer's power to require advance tax survives only in sections 210(3)/(4), and the interest consequences were shifted to the newly inserted sections 234A, 234B and 234C, with interest on excess payment now flowing from section 244A. Sections 207 to 211, 218 and 219 are thus the live operative core; sections 212, 213 and 209A stand omitted; and sections 214 to 217 survive only for assessment years up to 1988-89 (section 214(3)).
"Current income" and the rate in force
The base of advance tax is the assessee's estimate of his own current income, on which tax is computed at the rates in force for the financial year (section 209(1)(a)). Because the liability is forward-looking and self-estimated, the lawfulness of an advance-tax payment is tested by the honesty of the estimate at the time it is made, not by hindsight comparison with the figure finally assessed - a theme that runs through the interest provisions and their successors in sections 234B/234C.
Sub-section (2): the resident senior-citizen exemption
Sub-section (2), inserted by the Finance Act, 2012 (w.e.f. assessment year 2013-14), relieves a resident individual who is sixty years of age or more at any time during the previous year, and who has no income chargeable under the head "Profits and gains of business or profession", from the advance-tax obligation altogether. The exemption is conditioned on both limbs being satisfied: residence plus age, and the absence of any business or professional income. Such an assessee discharges his liability through self-assessment tax under section 140A without attracting interest under section 234B/234C for non-payment of advance tax. The relief is confined to individuals; it does not extend to a Hindu undivided family or to a non-resident, however aged.
The text of section 207 is rarely the direct battleground; disputes gravitate to the computation in section 209 and the interest provisions. The Supreme Court's reconstruction of the advance-tax scheme in Modi Industries - the meaning of "regular assessment", the date from which advance-tax and TDS credit is treated as payment of tax, and the interplay of sections 207, 208, 214 and 219 - remains the foundational authority for the Chapter as a whole and is noticed here because it fixes the conceptual frame within which section 207 operates.
B. STATUTORY POSITION (verbatim text)
Reproduced verbatim from the Income-tax Act, 1961 (as amended up to the Finance Act, 2025); the Finance Act, 2026 makes no amendment to this section. Editorial "[Omitted...]" notes are those of the Legislature.
207. (1) Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219 (both inclusive), in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as "current income".
(2) The provisions of sub-section (1) shall not apply to an individual resident in India, who—
(a) does not have any income chargeable under the head "Profits and gains of business or profession"; and
(b) is of the age of sixty years or more at any time during the previous year.
C. AUTHORITIES
The authorities bearing on section 207 are largely those that fix the scheme of the Chapter. The section's own text is settled; the live questions arise downstream in sections 209, 214 and 234B. All citations have been web-verified.
Cluster 1 - The advance-tax scheme, "current income" and credit
Modi Industries Ltd. v. CIT (1995) 216 ITR 759 (SC)
Issue: The meaning of "regular assessment" in the advance-tax/interest provisions, and the date from which advance tax and tax deducted at source are to be treated as payment of tax for the purpose of credit and interest.
Held: A Bench of three Judges authoritatively reconstructed the scheme of sections 207, 208, 209, 214 and 219. Advance tax paid (and TDS) is, on regular assessment, treated as payment of tax in respect of the relevant income (section 219); "regular assessment" means the first assessment made under section 143 or 144, not a reassessment or a revised/appeal-effect order; and interest under section 214 runs only up to that first regular assessment.
Significance: The governing exposition of how section 207 advance tax is collected, credited and carried into the assessment - the conceptual anchor for the entire Chapter XVII-C.
CIT v. Anjum M. H. Ghaswala (2001) 252 ITR 1 (SC) [Constitution Bench]
Principle: The liability to pay advance tax, and the consequential interest under the successor sections 234A/234B/234C, is mandatory and compensatory; it is not in the discretion even of the Settlement Commission to waive or reduce it.
Use: Confirms that the section 207 obligation, once attracted, is not a matter of grace - it underpins the automatic character of the interest consequences for default.
Cluster 2 - The senior-citizen exemption and computation interface
Section 207(2) is recent and has generated little reported merits litigation; the candour rule is observed. The cases below fix the computation backdrop against which the exemption and the charge operate.
DIT v. Mitsubishi Corporation (2021) 438 ITR 174 (SC)
Relevance: Holds that the advance-tax charge cannot be read in isolation from the computation in section 209 and the deduction/collection-at-source provisions of Chapter XVII; for periods before the Finance Act, 2012 proviso to section 209(1)(d), tax "deductible" at source reduced the advance-tax base even if not actually deducted.
Use: Illustrates that liability under section 207 is always worked out through section 209 - the charge and the computation are read together (treated in detail under section 209).
Position: Inserted by the Finance Act, 2012 w.e.f. assessment year 2013-14. A resident individual aged sixty years or more during the previous year, having no income under the head "Profits and gains of business or profession", is outside the advance-tax obligation and pays by self-assessment under section 140A without section 234B/234C exposure.
Candour: No Supreme Court or High Court decision turns on the construction of sub-section (2); its two cumulative conditions (residence-and-age; absence of business/professional income) are applied as written.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is omitted, spent or substantially unlitigated, the candour rule is observed - the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.
CHAPTER XVII - COLLECTION AND RECOVERY OF TAX - C.-ADVANCE PAYMENT OF TAX
Section 207 - Liability for Payment of Advance Tax
Case Laws & Commentary - Income-tax Act, 1961 (as amended by the Finance Act, 2026) - bharattax.co Treatise
Status: Live. The charging provision of the advance-tax code ("pay-as-you-earn").
Finance Act, 2026: No amendment. (The annual First Schedule rate-tables govern the rate at which advance tax is computed but operate around - not upon - section 207.)
Mechanism: Tax is payable in advance during the financial year on the assessee's "current income" (the total income chargeable for the next assessment year), computed under sections 208-219; resident senior citizens without business income are exempt (sub-section (2)).
Litigation profile: Foundational rather than heavily litigated on its own text; disputes migrate to sections 209, 214 and the successor interest sections 234B/234C.
A. SECTION COMMENTARY
Section 207 is the charging provision of the advance-tax code. It enacts the "pay-as-you-earn" principle in direct taxation: tax on the income of a financial year is to be paid, in substance, during that very year and not deferred to the assessment that follows. Sub-section (1) makes tax "payable in advance during any financial year, in accordance with the provisions of sections 208 to 219", in respect of the total income that would be chargeable for the assessment year immediately following - an income the section labels, for the rest of the Chapter, as the "current income". Advance tax is therefore a provisional collection against a liability that is finally quantified only on regular assessment; the sums paid are not the assessee's tax as such but a credit towards it, given effect by section 219.
The architecture of the modern Chapter
The present scheme is the product of the Direct Tax Laws (Amendment) Act, 1987 (w.e.f. 1 April 1988), which recast the whole Chapter. The earlier machinery - in which the assessee filed estimates and statements (sections 209A, 212, 213) and bore interest for shortfalls under sections 215 to 217 while the Government paid interest under section 214 - was dismantled. In its place came a self-operating model: the assessee computes and pays advance tax of his own accord under section 210(1), the Assessing Officer's power to require advance tax survives only in sections 210(3)/(4), and the interest consequences were shifted to the newly inserted sections 234A, 234B and 234C, with interest on excess payment now flowing from section 244A. Sections 207 to 211, 218 and 219 are thus the live operative core; sections 212, 213 and 209A stand omitted; and sections 214 to 217 survive only for assessment years up to 1988-89 (section 214(3)).
"Current income" and the rate in force
The base of advance tax is the assessee's estimate of his own current income, on which tax is computed at the rates in force for the financial year (section 209(1)(a)). Because the liability is forward-looking and self-estimated, the lawfulness of an advance-tax payment is tested by the honesty of the estimate at the time it is made, not by hindsight comparison with the figure finally assessed - a theme that runs through the interest provisions and their successors in sections 234B/234C.
Sub-section (2): the resident senior-citizen exemption
Sub-section (2), inserted by the Finance Act, 2012 (w.e.f. assessment year 2013-14), relieves a resident individual who is sixty years of age or more at any time during the previous year, and who has no income chargeable under the head "Profits and gains of business or profession", from the advance-tax obligation altogether. The exemption is conditioned on both limbs being satisfied: residence plus age, and the absence of any business or professional income. Such an assessee discharges his liability through self-assessment tax under section 140A without attracting interest under section 234B/234C for non-payment of advance tax. The relief is confined to individuals; it does not extend to a Hindu undivided family or to a non-resident, however aged.
Where section 207 is litigated
The text of section 207 is rarely the direct battleground; disputes gravitate to the computation in section 209 and the interest provisions. The Supreme Court's reconstruction of the advance-tax scheme in Modi Industries - the meaning of "regular assessment", the date from which advance-tax and TDS credit is treated as payment of tax, and the interplay of sections 207, 208, 214 and 219 - remains the foundational authority for the Chapter as a whole and is noticed here because it fixes the conceptual frame within which section 207 operates.
B. STATUTORY POSITION (verbatim text)
Reproduced verbatim from the Income-tax Act, 1961 (as amended up to the Finance Act, 2025); the Finance Act, 2026 makes no amendment to this section. Editorial "[Omitted...]" notes are those of the Legislature.
207. (1) Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219 (both inclusive), in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as "current income".
(2) The provisions of sub-section (1) shall not apply to an individual resident in India, who—
(a) does not have any income chargeable under the head "Profits and gains of business or profession"; and
(b) is of the age of sixty years or more at any time during the previous year.
C. AUTHORITIES
The authorities bearing on section 207 are largely those that fix the scheme of the Chapter. The section's own text is settled; the live questions arise downstream in sections 209, 214 and 234B. All citations have been web-verified.
Cluster 1 - The advance-tax scheme, "current income" and credit
Modi Industries Ltd. v. CIT (1995) 216 ITR 759 (SC)
Issue: The meaning of "regular assessment" in the advance-tax/interest provisions, and the date from which advance tax and tax deducted at source are to be treated as payment of tax for the purpose of credit and interest.
Held: A Bench of three Judges authoritatively reconstructed the scheme of sections 207, 208, 209, 214 and 219. Advance tax paid (and TDS) is, on regular assessment, treated as payment of tax in respect of the relevant income (section 219); "regular assessment" means the first assessment made under section 143 or 144, not a reassessment or a revised/appeal-effect order; and interest under section 214 runs only up to that first regular assessment.
Significance: The governing exposition of how section 207 advance tax is collected, credited and carried into the assessment - the conceptual anchor for the entire Chapter XVII-C.
CIT v. Anjum M. H. Ghaswala (2001) 252 ITR 1 (SC) [Constitution Bench]
Principle: The liability to pay advance tax, and the consequential interest under the successor sections 234A/234B/234C, is mandatory and compensatory; it is not in the discretion even of the Settlement Commission to waive or reduce it.
Use: Confirms that the section 207 obligation, once attracted, is not a matter of grace - it underpins the automatic character of the interest consequences for default.
Cluster 2 - The senior-citizen exemption and computation interface
Section 207(2) is recent and has generated little reported merits litigation; the candour rule is observed. The cases below fix the computation backdrop against which the exemption and the charge operate.
DIT v. Mitsubishi Corporation (2021) 438 ITR 174 (SC)
Relevance: Holds that the advance-tax charge cannot be read in isolation from the computation in section 209 and the deduction/collection-at-source provisions of Chapter XVII; for periods before the Finance Act, 2012 proviso to section 209(1)(d), tax "deductible" at source reduced the advance-tax base even if not actually deducted.
Use: Illustrates that liability under section 207 is always worked out through section 209 - the charge and the computation are read together (treated in detail under section 209).
Resident senior-citizen exemption - section 207(2)
Position: Inserted by the Finance Act, 2012 w.e.f. assessment year 2013-14. A resident individual aged sixty years or more during the previous year, having no income under the head "Profits and gains of business or profession", is outside the advance-tax obligation and pays by self-assessment under section 140A without section 234B/234C exposure.
Candour: No Supreme Court or High Court decision turns on the construction of sub-section (2); its two cumulative conditions (residence-and-age; absence of business/professional income) are applied as written.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is omitted, spent or substantially unlitigated, the candour rule is observed - the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.