Section 234B & 234C —
Interest on Advance Tax
What triggers Section 234B and 234C interest, the 1% per month rate, the 90% test, installment due dates and worked examples showing exactly how to avoid the charge.
Section 234B charges 1% per month simple interest when the advance tax you paid is less than 90% of your assessed tax — running from 1 April of the assessment year until you pay. Section 234C charges 1% per month on any installment shortfall (due 15 Jun / 15 Sep / 15 Dec / 15 Mar at 15% / 45% / 75% / 100%). Both apply only when tax payable after TDS exceeds ₹10,000.
Section 234A, 234B, 234C — Compared
All three charge simple interest at 1% per month (or part of a month) under the Income-tax Act 1961. The difference is what triggers each and over what period it runs. 234A is for late ITR filing; 234B and 234C are for advance-tax shortfalls.
| Section | Trigger | Rate | Period | On amount |
|---|---|---|---|---|
| 234A | ITR filed after due date | 1% / mo | Day after due date → date of filing | Tax payable − TDS − advance tax |
| 234B | Advance tax < 90% of assessed tax | 1% / mo | 1 April of AY → date tax is paid | Assessed tax − advance tax paid |
| 234C | Installment below required % | 1% / mo | 3 months per installment (1 mo for last) | Required installment − amount paid |
Interest is always simple (not compounded) and any part of a month counts as a full month. Rates are unchanged for FY 2025-26 / AY 2026-27.
A single shortfall can attract 234C (during the year, per installment) and 234B (after the year, until you pay). They are not mutually exclusive — a taxpayer who underpays every installment and files late can face 234A, 234B and 234C at once.
Section 234B — Default in Advance Tax
Section 234B applies when your total advance tax paid is less than 90% of the assessed tax (final tax liability minus TDS/TCS and relief). Interest at 1% per month runs from 1 April of the assessment year until you pay the self-assessment tax.
- Assessed tax = total tax − TDS/TCS − reliefs (e.g. Section 89) − foreign tax credit.
- If advance tax paid is ≥ 90% of assessed tax, no 234B applies.
- Interest is charged on the full shortfall (assessed tax − advance tax paid), rounded down to the nearest ₹100.
- Every part-month counts as a whole month — so tax paid on, say, 20 July still attracts 4 months of interest (Apr–Jul).
234B example — ₹20,000 shortfall
Safe — 90% paid, no 234B
Self-employed with no TDS? 234B is the interest that catches you most.
Get Advance-Tax Help →Section 234C — Late Advance-Tax Installments
Section 234C charges interest when a quarterly installment falls short of the required cumulative percentage, even if you pay the full amount by year-end. Interest is 1% per month for the deferral period of each installment.
| Installment | Due date | Cumulative % due | 234C if short |
|---|---|---|---|
| 1st | 15 June | 15% | 1% × 3 months on shortfall |
| 2nd | 15 September | 45% | 1% × 3 months on shortfall |
| 3rd | 15 December | 75% | 1% × 3 months on shortfall |
| 4th | 15 March | 100% | 1% × 1 month on shortfall |
Presumptive taxpayers under Section 44AD / 44ADA pay 100% by 15 March in a single installment — no 234C on the first three, only if the 15 March payment falls short.
234C is not charged on the June installment if you have paid at least 12% by 15 June, or on the September installment if you have paid at least 36% by 15 September. This tolerance exists because early-year income is hard to estimate.
234C — nothing paid by 15 June
234C — last installment short
If a shortfall arises because of capital gains, winnings from lottery, or first-time dividend/business income that could not be estimated earlier, no 234C applies on that portion — provided the tax on it is paid in the remaining installments (or by 31 March).
How to Avoid 234B & 234C Interest
- Estimate your annual income and tax early, then pay each installment on time
- Pay at least 90% of assessed tax as advance tax to escape 234B
- Hit 15% by 15 Jun, 45% by 15 Sep, 75% by 15 Dec, 100% by 15 Mar for 234C
- Use the 12% / 36% tolerance for the first two installments
- Ask your employer to increase TDS to cover other income and avoid installments
- Revise your estimate mid-year if income rises (e.g. bonus, capital gains)
- Presumptive (44AD/44ADA): simply pay 100% by 15 March
- Pay any self-assessment tax before filing to stop 234B from running
Salaried taxpayers with only TDS-covered income rarely face 234B/234C. The risk is highest for the self-employed, freelancers, investors with capital gains, and those with rental or interest income where no TDS (or insufficient TDS) is deducted. Use our income-tax calculator to project your liability and plan installments.
You are safe if
- Your tax after TDS is ₹10,000 or less
- You paid ≥ 90% of assessed tax as advance tax
- Each installment met its cumulative %
- You are a senior citizen with no business income (234B relief)
You are at risk if
- You are self-employed with little or no TDS
- You had large capital gains you did not top-up
- You skipped or underpaid installments
- You will file after the ITR due date (adds 234A too)
Want your advance-tax installments and 234B/234C exposure calculated?
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