Advance tax is income tax that a taxpayer pays in instalments during the year on their estimated total income, while TDS is tax deducted at source by the payer when making specified payments. Both are pre-paid taxes credited against the final liability; advance tax is needed only on income not already covered by TDS.
The core difference
| Feature | Advance tax | TDS |
|---|---|---|
| Who pays | The taxpayer (self) | The payer deducts |
| On what | Estimated total income | Specified payments |
| When | Quarterly instalments | At credit/payment |
| Governing sections | 208-211 | Chapter XVII-B |
How they interact
You compute advance tax on your estimated total income, then reduce the TDS/TCS already deducted; advance tax is payable only on the balance. So if your income is largely salary or interest where TDS is deducted, your advance-tax obligation may be small or nil. Both appear as pre-paid taxes in the return and are netted against the final liability, with any excess refunded.
Worked example
Estimated tax on total income = Rs.2,00,000. TDS deducted by employer/bank = Rs.1,40,000. Net liability = Rs.60,000. Since this exceeds Rs.10,000, advance tax of Rs.60,000 is payable across the instalments; the Rs.1,40,000 TDS already covers the rest.
Why it matters
- Ignoring advance tax on non-TDS income (capital gains, rent, business) triggers 234B/234C interest.
- Reconcile TDS via Form 26AS before estimating advance tax.
- Use the Advance Tax Calculator after deducting TDS.
- Senior citizens without business income are exempt from advance tax.
Key takeaways
- Advance tax: self-paid in instalments on estimated income.
- TDS: withheld by the payer on specified payments.
- Advance tax is due only on income not covered by TDS.
- Non-TDS income (gains, rent) often drives advance-tax liability.