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 209 - Computation of Advance Tax
Case Laws & Commentary - Income-tax Act, 1961 (as amended by the Finance Act, 2026) - bharattax.co Treatise
Status: Live. The computational core of the Chapter and its most litigated section.
Finance Act, 2026: No amendment. (The Finance Act, 2012 proviso to sub-section (1) - the deductible-but-not-deducted rule - remains the operative dividing line; FA 2026 does not touch it.)
Mechanism: Advance tax = income-tax on the estimated current income (assessee) or latest assessed/returned income (Assessing Officer), at the rates in force, reduced by tax deductible or collectible at source - subject to the FA 2012 proviso.
Litigation profile: Heaviest in the Chapter; concentrated on clause (d) and the pre-/post-Finance Act, 2012 divide, with a strong Supreme Court and Delhi High Court line.
A. SECTION COMMENTARY
Section 209 is the computational heart of the Chapter and, in modern practice, its most litigated provision. It tells the assessee (and, in the residual cases, the Assessing Officer) how to arrive at the figure of advance tax. The assessee first estimates his current income and computes income-tax thereon at the rates in force for the financial year (clause (a)); the Assessing Officer, when acting under section 210(3)/(4), works instead from the latest assessed or returned total income (clauses (b) and (c)); and in every case the income-tax so calculated is then reduced, under clause (d), by the amount of tax that "would be deductible or collectible at source" during that financial year on income taken into account in the computation. The amount as so reduced is the advance tax payable.
Clause (d) and the "deductible or collectible" controversy
The expression "would be deductible or collectible at source" in clause (d) generated a long line of litigation, especially in the case of payments to non-residents. The settled construction, for the period before the Finance Act, 2012, was that the payee could reduce from his advance-tax base the whole of the tax that was deductible at source on his income - whether or not the payer actually deducted it - because the statutory obligation to deduct lay on the payer. The consequence was that a non-resident whose entire Indian income was subject to TDS at source had no advance-tax liability and could not be charged interest under section 234B for a shortfall caused by the payer's default.
The Finance Act, 2012 proviso
To reverse that result prospectively, the Finance Act, 2012 inserted the proviso to section 209(1) (w.e.f. 1 April 2012, applicable to advance tax payable in the financial year 2012-13 and onwards): where the payer has paid or credited the income without deducting tax (or the collector has received/debited it without collecting), the income-tax shall not be reduced by that deductible/collectible amount. After the proviso, only tax actually deducted/collected may be set off in computing advance tax; tax merely deductible but not deducted no longer reduces the base. The legal position therefore turns sharply on whether the year in question is before or after financial year 2012-13.
Net agricultural income and the HUF rate (sub-sections (2) and (3))
Sub-section (2) requires net agricultural income to be brought into the advance-tax computation where the relevant Finance Act so provides for the class of assessee (the agricultural-income aggregation used for rate purposes). Sub-section (3) deals with the Assessing Officer's computation of advance tax for a Hindu undivided family where the relevant Finance Act prescribes a separate rate for an HUF having at least one member whose total income exceeds the maximum amount not chargeable to tax. Both are rate-mechanics provisions feeding the clause (a)/(b)/(c) calculation.
Because the charge in section 207 and the threshold in section 208 are both worked out through section 209, almost every substantive advance-tax dispute is, at bottom, a section 209 dispute - what enters the current income, at what rate, and how much TDS/TCS is to be reduced. The cluster of Supreme Court and High Court authority below is therefore the largest in the Chapter.
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.
209. (1) The amount of advance tax payable by an assessee in the financial year shall, subject to the provisions of sub-sections (2) and (3), be computed as follows, namely :—
(a) where the calculation is made by the assessee for the purposes of payment of advance tax under sub-section (1) or sub-section (2) or sub-section (5) or sub-section (6) of section 210, he shall first estimate his current income and income-tax thereon shall be calculated at the rates in force in the financial year;
(b) where the calculation is made by the Assessing Officer for the purpose of making an order under sub-section (3) of section 210, the total income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment or the total income returned by the assessee in any return of income furnished by him for any subsequent previous year, whichever is higher, shall be taken and income-tax thereon shall be calculated at the rates in force in the financial year;
(c) where the calculation is made by the Assessing Officer for the purpose of making an amended order under sub-section (4) of section 210, the total income declared in the return furnished by the assessee for the later previous year, or, as the case may be, the total income in respect of which the regular assessment, referred to in that sub-section has been made, shall be taken and income-tax thereon shall be calculated at the rates in force in the financial year;
(d) the income-tax calculated under clause (a) or clause (b) or clause (c) shall, in each case, be reduced by the 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 (as computed before allowing any deductions admissible under this Act) which has been taken into account in computing the current income or, as the case may be, the total income aforesaid; and the amount of income-tax as so reduced shall be the advance tax payable:
Provided that for computing liability for advance tax, income-tax calculated under clause (a) or clause (b) or clause (c) shall not, in each case, be reduced by the aforesaid 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, if the person responsible for deducting tax has paid or credited such income without deduction of tax or it has been received or debited by the person responsible for collecting tax without collection of such tax.
(2) Where the Finance Act of the relevant year provides that, in the case of any class of assessees, net agricultural income (as defined in that Act) shall be taken into account for the purposes of computing advance tax, then, the net agricultural income to be taken into account in the case of any assessee falling in that class, shall be—
(a) in cases where the Assessing Officer makes an order under sub-section (3) or sub-section (4) of section 210,—
(i) if the total income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment forms the basis of computation of advance tax payable by him, the net agricultural income which has been taken into account for the purposes of charging income-tax for the assessment year relevant to that previous year; or
(ii) if the total income declared by the assessee for the later previous year referred to in sub-section (4) of section 210 forms the basis of computation of advance tax, the net agricultural income as returned by the assessee in the return of income for the assessment year relevant to such later previous year;
(b) in cases where the advance tax is paid by the assessee on the basis of his estimate of his current income under sub-section (1) or sub-section (2) or sub-section (5) or sub-section (6) of section 210, the net agricultural income, as estimated by him, of the period which would be the previous year for the immediately following assessment year.
(3) Where the Finance Act of the relevant year specifies any separate rate or rates for the purposes of computing advance tax in the case of every Hindu undivided family which has at least one member whose total income of the previous year exceeds the maximum amount not chargeable to income-tax in his case, then, the Assessing Officer shall, for making an order under sub-section (3) or sub-section (4) of section 210 in the case of any such Hindu undivided family, compute (subject to the provisions of section 164) the advance tax at such rate or rates—
(a) in a case where the total income of the latest previous year in respect of which the Hindu undivided family has been assessed by way of regular assessment forms the basis of computation of advance tax, if the total income of any member of the family for the assessment year relevant to such latest previous year exceeds the maximum amount not chargeable to income-tax in his case;
(b) in a case where the total income of the previous year in respect of which a return of income is furnished by the Hindu undivided family under section 139 or in response to a notice under sub-section (1) of section 142 forms the basis of computation of advance tax, if the total income of any member of the family for the assessment year relevant to such previous year exceeds the maximum amount not chargeable to income-tax in his case.
C. AUTHORITIES
Section 209 carries the heaviest litigation in the Chapter, concentrated on clause (d) - the reduction for tax deductible or collectible at source - and the divide created by the Finance Act, 2012 proviso. The authorities are arranged by (1) the apex ruling, (2) the High Court line it affirms, and (3) the post-2012 position. All citations have been web-verified.
Cluster 1 - The Supreme Court on clause (d): tax "deductible" reduces the base (pre-2012)
DIT v. Mitsubishi Corporation (2021) 438 ITR 174 (SC)
Issue: Whether an assessee (typically a non-resident) is liable to interest under section 234B for a shortfall in advance tax where the shortfall arose because the payer failed to deduct tax at source that it was bound to deduct - for assessment years before the Finance Act, 2012 proviso.
Held: No. Section 234B cannot be read in isolation from section 209(1)(d): for the pre-2012 period, the advance-tax payable was to be computed after reducing the income-tax by the amount "deductible or collectible at source", whether or not the payer actually deducted it. The payee's advance-tax liability was correspondingly reduced, so no interest under section 234B could be charged for the resulting shortfall. The proviso inserted by the Finance Act, 2012 (w.e.f. 1 April 2012) changes the position only prospectively.
Significance: The leading and most recent Supreme Court authority on section 209(1)(d); it settles the construction of "deductible or collectible" and fixes 1 April 2012 as the dividing line.
Cluster 2 - The High Court line affirmed by Mitsubishi
DIT v. Jacabs Civil Incorporated / Mitsubishi Corporation (2011) 330 ITR 578 (Delhi)
Issue: Liability of a non-resident to interest under section 234B where its Indian income was wholly subject to tax deduction at source.
Held: Under section 209(1)(d), the tax "deductible or collectible at source" must be reduced from the advance tax payable. Where the entire income is liable to TDS in the hands of the payer, the non-resident recipient is not liable to pay advance tax, and interest under section 234B cannot be charged for its non-payment. (The Court also held section 234D, inserted w.e.f. 1 June 2003, to be substantive and applicable only from assessment year 2004-05.)
Significance: The foundational High Court statement of the pre-2012 rule, expressly approved in Mitsubishi.
DIT v. GE Packaged Power Inc. (2015) 373 ITR 65 (Delhi)
Issue: Whether an assessee must pay section 234B interest for a shortfall of advance tax where it is said to have "induced" the payer not to deduct TDS.
Held: The obligation to deduct is on the payer; section 209(1)(d) allows the payee to reduce the deductible tax in computing advance tax, and the view that the payee must nevertheless bear section 234B interest for the payer's default could not be sustained. (The contrary suggestion in the earlier Alcatel-Lucent line was not followed.)
Significance: Reinforces the Jacabs Civil rule and rejects the "inducement" exception for the pre-2012 period.
Cluster 3 - The post-2012 position and the rate mechanics
After the Finance Act, 2012 proviso, only tax actually deducted/collected reduces the advance-tax base; tax merely deductible does not.
Effect of the Finance Act, 2012 proviso to section 209(1)
Position: For advance tax payable in financial year 2012-13 and onwards, where the payer pays/credits income without deducting tax (or the collector receives/debits without collecting), the income-tax is not to be reduced by that amount. The payee must then pay advance tax on such income and bears section 234B/234C interest on default.
Use: The statutory reversal of the Jacabs Civil / Mitsubishi rule, operating prospectively; the year of the advance-tax liability decides which rule applies.
Net agricultural income and HUF rate - sub-sections (2) and (3)
Position: Where the relevant Finance Act so provides, net agricultural income is aggregated for rate purposes in the advance-tax computation (sub-section (2)), and a separate HUF rate may be applied by the Assessing Officer under sub-section (3) where a member's income exceeds the exemption limit.
Candour: These rate-mechanics limbs are applied as written and have generated no separate reported merits litigation of significance; they follow the annual Finance Act.
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 209 - Computation of Advance Tax
Case Laws & Commentary - Income-tax Act, 1961 (as amended by the Finance Act, 2026) - bharattax.co Treatise
Status: Live. The computational core of the Chapter and its most litigated section.
Finance Act, 2026: No amendment. (The Finance Act, 2012 proviso to sub-section (1) - the deductible-but-not-deducted rule - remains the operative dividing line; FA 2026 does not touch it.)
Mechanism: Advance tax = income-tax on the estimated current income (assessee) or latest assessed/returned income (Assessing Officer), at the rates in force, reduced by tax deductible or collectible at source - subject to the FA 2012 proviso.
Litigation profile: Heaviest in the Chapter; concentrated on clause (d) and the pre-/post-Finance Act, 2012 divide, with a strong Supreme Court and Delhi High Court line.
A. SECTION COMMENTARY
Section 209 is the computational heart of the Chapter and, in modern practice, its most litigated provision. It tells the assessee (and, in the residual cases, the Assessing Officer) how to arrive at the figure of advance tax. The assessee first estimates his current income and computes income-tax thereon at the rates in force for the financial year (clause (a)); the Assessing Officer, when acting under section 210(3)/(4), works instead from the latest assessed or returned total income (clauses (b) and (c)); and in every case the income-tax so calculated is then reduced, under clause (d), by the amount of tax that "would be deductible or collectible at source" during that financial year on income taken into account in the computation. The amount as so reduced is the advance tax payable.
Clause (d) and the "deductible or collectible" controversy
The expression "would be deductible or collectible at source" in clause (d) generated a long line of litigation, especially in the case of payments to non-residents. The settled construction, for the period before the Finance Act, 2012, was that the payee could reduce from his advance-tax base the whole of the tax that was deductible at source on his income - whether or not the payer actually deducted it - because the statutory obligation to deduct lay on the payer. The consequence was that a non-resident whose entire Indian income was subject to TDS at source had no advance-tax liability and could not be charged interest under section 234B for a shortfall caused by the payer's default.
The Finance Act, 2012 proviso
To reverse that result prospectively, the Finance Act, 2012 inserted the proviso to section 209(1) (w.e.f. 1 April 2012, applicable to advance tax payable in the financial year 2012-13 and onwards): where the payer has paid or credited the income without deducting tax (or the collector has received/debited it without collecting), the income-tax shall not be reduced by that deductible/collectible amount. After the proviso, only tax actually deducted/collected may be set off in computing advance tax; tax merely deductible but not deducted no longer reduces the base. The legal position therefore turns sharply on whether the year in question is before or after financial year 2012-13.
Net agricultural income and the HUF rate (sub-sections (2) and (3))
Sub-section (2) requires net agricultural income to be brought into the advance-tax computation where the relevant Finance Act so provides for the class of assessee (the agricultural-income aggregation used for rate purposes). Sub-section (3) deals with the Assessing Officer's computation of advance tax for a Hindu undivided family where the relevant Finance Act prescribes a separate rate for an HUF having at least one member whose total income exceeds the maximum amount not chargeable to tax. Both are rate-mechanics provisions feeding the clause (a)/(b)/(c) calculation.
Why section 209 dominates the litigation
Because the charge in section 207 and the threshold in section 208 are both worked out through section 209, almost every substantive advance-tax dispute is, at bottom, a section 209 dispute - what enters the current income, at what rate, and how much TDS/TCS is to be reduced. The cluster of Supreme Court and High Court authority below is therefore the largest in the Chapter.
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.
209. (1) The amount of advance tax payable by an assessee in the financial year shall, subject to the provisions of sub-sections (2) and (3), be computed as follows, namely :—
(a) where the calculation is made by the assessee for the purposes of payment of advance tax under sub-section (1) or sub-section (2) or sub-section (5) or sub-section (6) of section 210, he shall first estimate his current income and income-tax thereon shall be calculated at the rates in force in the financial year;
(b) where the calculation is made by the Assessing Officer for the purpose of making an order under sub-section (3) of section 210, the total income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment or the total income returned by the assessee in any return of income furnished by him for any subsequent previous year, whichever is higher, shall be taken and income-tax thereon shall be calculated at the rates in force in the financial year;
(c) where the calculation is made by the Assessing Officer for the purpose of making an amended order under sub-section (4) of section 210, the total income declared in the return furnished by the assessee for the later previous year, or, as the case may be, the total income in respect of which the regular assessment, referred to in that sub-section has been made, shall be taken and income-tax thereon shall be calculated at the rates in force in the financial year;
(d) the income-tax calculated under clause (a) or clause (b) or clause (c) shall, in each case, be reduced by the 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 (as computed before allowing any deductions admissible under this Act) which has been taken into account in computing the current income or, as the case may be, the total income aforesaid; and the amount of income-tax as so reduced shall be the advance tax payable:
Provided that for computing liability for advance tax, income-tax calculated under clause (a) or clause (b) or clause (c) shall not, in each case, be reduced by the aforesaid 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, if the person responsible for deducting tax has paid or credited such income without deduction of tax or it has been received or debited by the person responsible for collecting tax without collection of such tax.
(2) Where the Finance Act of the relevant year provides that, in the case of any class of assessees, net agricultural income (as defined in that Act) shall be taken into account for the purposes of computing advance tax, then, the net agricultural income to be taken into account in the case of any assessee falling in that class, shall be—
(a) in cases where the Assessing Officer makes an order under sub-section (3) or sub-section (4) of section 210,—
(i) if the total income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment forms the basis of computation of advance tax payable by him, the net agricultural income which has been taken into account for the purposes of charging income-tax for the assessment year relevant to that previous year; or
(ii) if the total income declared by the assessee for the later previous year referred to in sub-section (4) of section 210 forms the basis of computation of advance tax, the net agricultural income as returned by the assessee in the return of income for the assessment year relevant to such later previous year;
(b) in cases where the advance tax is paid by the assessee on the basis of his estimate of his current income under sub-section (1) or sub-section (2) or sub-section (5) or sub-section (6) of section 210, the net agricultural income, as estimated by him, of the period which would be the previous year for the immediately following assessment year.
(3) Where the Finance Act of the relevant year specifies any separate rate or rates for the purposes of computing advance tax in the case of every Hindu undivided family which has at least one member whose total income of the previous year exceeds the maximum amount not chargeable to income-tax in his case, then, the Assessing Officer shall, for making an order under sub-section (3) or sub-section (4) of section 210 in the case of any such Hindu undivided family, compute (subject to the provisions of section 164) the advance tax at such rate or rates—
(a) in a case where the total income of the latest previous year in respect of which the Hindu undivided family has been assessed by way of regular assessment forms the basis of computation of advance tax, if the total income of any member of the family for the assessment year relevant to such latest previous year exceeds the maximum amount not chargeable to income-tax in his case;
(b) in a case where the total income of the previous year in respect of which a return of income is furnished by the Hindu undivided family under section 139 or in response to a notice under sub-section (1) of section 142 forms the basis of computation of advance tax, if the total income of any member of the family for the assessment year relevant to such previous year exceeds the maximum amount not chargeable to income-tax in his case.
C. AUTHORITIES
Section 209 carries the heaviest litigation in the Chapter, concentrated on clause (d) - the reduction for tax deductible or collectible at source - and the divide created by the Finance Act, 2012 proviso. The authorities are arranged by (1) the apex ruling, (2) the High Court line it affirms, and (3) the post-2012 position. All citations have been web-verified.
Cluster 1 - The Supreme Court on clause (d): tax "deductible" reduces the base (pre-2012)
DIT v. Mitsubishi Corporation (2021) 438 ITR 174 (SC)
Issue: Whether an assessee (typically a non-resident) is liable to interest under section 234B for a shortfall in advance tax where the shortfall arose because the payer failed to deduct tax at source that it was bound to deduct - for assessment years before the Finance Act, 2012 proviso.
Held: No. Section 234B cannot be read in isolation from section 209(1)(d): for the pre-2012 period, the advance-tax payable was to be computed after reducing the income-tax by the amount "deductible or collectible at source", whether or not the payer actually deducted it. The payee's advance-tax liability was correspondingly reduced, so no interest under section 234B could be charged for the resulting shortfall. The proviso inserted by the Finance Act, 2012 (w.e.f. 1 April 2012) changes the position only prospectively.
Significance: The leading and most recent Supreme Court authority on section 209(1)(d); it settles the construction of "deductible or collectible" and fixes 1 April 2012 as the dividing line.
Cluster 2 - The High Court line affirmed by Mitsubishi
DIT v. Jacabs Civil Incorporated / Mitsubishi Corporation (2011) 330 ITR 578 (Delhi)
Issue: Liability of a non-resident to interest under section 234B where its Indian income was wholly subject to tax deduction at source.
Held: Under section 209(1)(d), the tax "deductible or collectible at source" must be reduced from the advance tax payable. Where the entire income is liable to TDS in the hands of the payer, the non-resident recipient is not liable to pay advance tax, and interest under section 234B cannot be charged for its non-payment. (The Court also held section 234D, inserted w.e.f. 1 June 2003, to be substantive and applicable only from assessment year 2004-05.)
Significance: The foundational High Court statement of the pre-2012 rule, expressly approved in Mitsubishi.
DIT v. GE Packaged Power Inc. (2015) 373 ITR 65 (Delhi)
Issue: Whether an assessee must pay section 234B interest for a shortfall of advance tax where it is said to have "induced" the payer not to deduct TDS.
Held: The obligation to deduct is on the payer; section 209(1)(d) allows the payee to reduce the deductible tax in computing advance tax, and the view that the payee must nevertheless bear section 234B interest for the payer's default could not be sustained. (The contrary suggestion in the earlier Alcatel-Lucent line was not followed.)
Significance: Reinforces the Jacabs Civil rule and rejects the "inducement" exception for the pre-2012 period.
Cluster 3 - The post-2012 position and the rate mechanics
After the Finance Act, 2012 proviso, only tax actually deducted/collected reduces the advance-tax base; tax merely deductible does not.
Effect of the Finance Act, 2012 proviso to section 209(1)
Position: For advance tax payable in financial year 2012-13 and onwards, where the payer pays/credits income without deducting tax (or the collector receives/debits without collecting), the income-tax is not to be reduced by that amount. The payee must then pay advance tax on such income and bears section 234B/234C interest on default.
Use: The statutory reversal of the Jacabs Civil / Mitsubishi rule, operating prospectively; the year of the advance-tax liability decides which rule applies.
Net agricultural income and HUF rate - sub-sections (2) and (3)
Position: Where the relevant Finance Act so provides, net agricultural income is aggregated for rate purposes in the advance-tax computation (sub-section (2)), and a separate HUF rate may be applied by the Assessing Officer under sub-section (3) where a member's income exceeds the exemption limit.
Candour: These rate-mechanics limbs are applied as written and have generated no separate reported merits litigation of significance; they follow the annual Finance Act.
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.