Is there evidence or rule in UX against showing tabs within wizard steps for forms? For e.g If there is a 4 step process and it needs to be brought down to 3 steps, we are thinking of combining 2 steps into one to make it so. However it will become a very big step with lots of fields. So is tabbing relevant/advanced but not mandatory information a do-able idea or having a collapsible section better?
You are trying to combine two different navigation methods, which is always going to be confusing and problematic. In wizards that have tabs within the steps, these should only be used for some extra, optional, additions, not for the main use. It should be normal to go through the wizard giving minimal information and get a correct and reasonable result out of the far end.
You may, based on other comments, be able to put some of the optional information on a separate tab, if you reorganise your data. But do not make the normal or expected route through the wizard including a second tab.
If you've got two tabs or an "advanced" section then unless that information is optional it's still really four steps. You haven't really shortened the process but you've made it more likely that people will miss out this "hidden" step.
If you really want it to be three steps rather than four then you must either:
If neither of these approaches work, then you are left with keeping it as a four step wizard.