Advance Deduction

Tax Glossary Definition

An Advance Deduction refers to a tax deduction that is claimed before the actual payment is made, but only when the Income Tax Act permits such a claim.
It is usually allowed when the taxpayer has committed or accrued the liability and is expected to make the payment within the prescribed time.

This concept ensures that taxpayers get timely tax benefits without waiting for the full payment to occur.

Key Features

Point	Explanation
Timing	Deduction claimed before the actual payment
Eligibility	Must satisfy specific conditions under tax law
Recognition	Usually based on accrual of expense or commitment
Purpose	Helps align deductions with the correct income year

Common Situations Where Advance Deductions May Apply

Certain donations (if paid before filing the return)
Statutory expenses accrued but not yet paid within the accounting year
Contributions committed under specific sections (subject to conditions)

Example

A taxpayer commits to donate ₹20,000 to an approved charitable institution and later pays it before filing the income tax return.

They can claim the deduction under Section 80G in the same financial year
even though payment occurs after the year-end but before return filing.

Thus, it is treated as an advance deduction.