How advance tax interest is computed
Advance tax is payable where estimated tax for the year, after TDS/TCS credit, is ₹10,000 or more (Sec 208). Regular assessees follow a four-instalment schedule under Sec 211: 15% of the estimated tax by 15 June, 45% cumulative by 15 September, 75% cumulative by 15 December, and 100% by 15 March. Assessees declaring income under the presumptive schemes (Sec 44AD business income, Sec 44ADA professional income) pay in a single instalment — 100% by 15 March.
Section 234C charges interest at 1% per month on the SHORTFALL for each instalment against its required cumulative percentage — three months' interest for a shortfall in each of the first three instalments (June, September, December), and one month's interest for a shortfall in the final (March) instalment, including the presumptive assessee's single instalment.
Section 234B is a separate, year-end test: if total advance tax paid by 31 March is less than 90% of the final assessed tax, interest runs at 1% per month (or part) on the shortfall (assessed tax minus advance tax paid), from 1 April of the assessment year to the date the balance is actually paid (or to the date of a regular assessment, if earlier). A taxpayer can owe 234C on instalment timing even while ultimately avoiding 234B by making up the shortfall before 31 March — or vice versa.
Worked example — regular assessee, ₹5 lakh estimated tax
Estimated tax for the year: ₹5,00,000. Paid ₹50,000 by 15 June (required ₹75,000), ₹1,50,000 cumulative by 15 September (required ₹2,25,000), ₹3,00,000 cumulative by 15 December (required ₹3,75,000), and ₹4,20,000 cumulative by 15 March (required ₹5,00,000). Balance tax paid on 15 July of the assessment year.
Inputs
June shortfall₹75,000 − ₹50,000 = ₹25,000 × 1% × 3 = ₹750
September shortfall₹2,25,000 − ₹1,50,000 = ₹75,000 × 1% × 3 = ₹2,250
December shortfall₹3,75,000 − ₹3,00,000 = ₹75,000 × 1% × 3 = ₹2,250
March shortfall₹5,00,000 − ₹4,20,000 = ₹80,000 × 1% × 1 = ₹800
Output
Total Sec 234C interest₹6,050
Sec 234B (paid ₹4.2L vs 90% of ₹5L = ₹4.5L — shortfall)₹80,000 shortfall × 1% × 4 months (Apr-Jul) = ₹3,200
Total interest₹9,250
The 90% test for 234B is against total advance tax paid by 31 March (₹4,20,000), which is below ₹4,50,000 (90% of ₹5,00,000) — so 234B applies on top of the 234C instalment shortfalls, running from 1 April to the actual payment date in July.
Common mistakes
Applying 234B interest even when the 90% threshold is met
If advance tax paid by 31 March is 90% or more of the assessed tax, Sec 234B does NOT apply at all — even a small remaining balance settled later carries no 234B interest, only self-assessment interest under Sec 234A if the return itself is late.
Using 3 months for the March instalment shortfall
Only the first three instalments (June, September, December) carry 3 months of 234C interest per shortfall. The March instalment — and the presumptive assessee's single instalment — carries only 1 month.
Missing the presumptive-scheme single-instalment rule
Sec 44AD/44ADA presumptive assessees have NO interim instalment obligation — no 234C exposure for June/September/December shortfalls. Their entire liability is due, and tested, only at the 15 March instalment.
Forgetting the capital-gains / casual-income safe harbour
Sec 234C carries a proviso: shortfall in an instalment attributable to capital gains, casual income (e.g. lottery), or presumptive business income not reasonably foreseeable at that instalment date attracts no interest for THAT instalment, if the shortfall is made good in the immediately following instalment (or by 31 March for a December shortfall). This calculator does not model that safe harbour — apply it manually where relevant.
Guessing the Income Tax Act 2025 section numbers
Sections 234B and 234C are cited here under the 1961 Act only. Their equivalents under the Income Tax Act 2025 are not yet in CORAA's verified section mapper — check the mapper (or the Act directly) before dual-citing in FY 2026-27+ documents rather than assuming a renumbering pattern.
Frequently asked questions
What is the advance tax instalment schedule?+
For regular (non-presumptive) assessees: 15% of estimated tax by 15 June, 45% cumulative by 15 September, 75% cumulative by 15 December, 100% by 15 March. Sec 44AD/44ADA presumptive-income assessees pay in a single instalment — 100% by 15 March, with no interim obligation.
What is the difference between Section 234B and Section 234C interest?+
Section 234C charges interest on the shortfall at each SCHEDULED INSTALMENT against its required cumulative percentage — an in-year timing test. Section 234B is a single YEAR-END test: whether total advance tax paid by 31 March reached 90% of the final assessed tax; if not, interest runs from 1 April of the assessment year until the shortfall is paid.
Is there any relief from Section 234C for capital gains or unforeseen income?+
Yes — a proviso to Sec 234C exempts interest on a shortfall in an instalment that is attributable to capital gains, casual income (like lottery winnings), or presumptive business/professional income not reasonably foreseeable as of that instalment date, PROVIDED the shortfall is made good in the immediately following instalment (or, for a December shortfall, by 31 March).
Does advance tax apply if tax is fully covered by TDS?+
No separate advance tax liability arises where the ESTIMATED tax after TDS/TCS credit is below ₹10,000 (Sec 208) — the ₹10,000 test is applied to the net figure, not gross tax before TDS.
Authoritative sources
Sections 208, 211, 234B, 234C, Income-tax Act 1961 — Rates and schedule verified 19 July 2026. New IT Act 2025 section numbers for 234B/234C not independently verified — cited here under the 1961 Act only; check the section mapper before dual-citing. Always confirm against the latest version of the source. Regulations evolve and amendments are common.
Last reviewed: 2026-07-19 · For informational purposes only — not professional advice.
