Interest Imposed By The IT Department - Section 234B

Section 234B touches upon fines and penalties that the income tax department can impose in case of a default or delay in paying advance tax. Section 234B interest calculation starts from the end of the financial year, i.e. for FY 2024-25 interest u/s 234B will start from 1st April 2025. Refer to our guides for interest under Section 234A and Section 234C. 

What is an Advance Tax?

If your tax liability is Rs 10,000 or more in a financial year, advance tax is applicable for you. Advance tax means paying your tax dues in installments on the specified due dates provided by the income tax department. Advance tax is also known as ‘pay-as-you-earn’ tax. If you don’t pay advance tax on time or default completely, interest liability under section 234B will be applicable.

Who Needs to Pay Advance Tax?

All assesses including salaried employees, self-employed professionals, businessmen, etc. are required to pay advance tax, where the tax payable even after reducing TDS/TCS/Relief under Section 89 and 90 is Rs 10,000 or more.  

What is assessed tax?

Assessed tax is the total income tax on taxable income less the following deductions:

• Tax deducted at the source, tax collected at the source
• Tax relief or deduction, such as Sections 89, 90, and so on
• Tax credit under sections 115JAA or 115JD

Interest under Section 234B: Default in Payment of Advance Tax

Interest under section 234B is applicable when:

• Your tax liability after reducing TDS/TCS/Relief under Sections 89 and 90 for the financial year is more than Rs 10,000 and you did not pay any advance tax.
• You paid advance tax, but the amount paid is less than 90% of the ‘assessed tax’.
• If the taxpayer files an updated ITR, the amount of advance tax paid is lowered only once for calculating the interest payable under section 234B.

In the above cases, interest under section 234B shall be applicable. Interest is calculated at 1% on assessed tax less advance tax. Part of a month is rounded off to a full month. The amount on which interest is calculated is also rounded off in such a way that any fraction of a hundred is ignored.

Interest under Section 234B will be calculated from April 1st of the assessment year till the due date for filing the tax return. For FY 2024-25 (AY 2025-26) the due date for non-audit cases has been extended to 15th September 2025. Hence, for FY 2024-25 only, the interest component under Section 234B will be calculated from 1st April 2025 till 15th September 2025.

Related Articles

Interest Imposed by the IT Department on delay of advance tax payment – Section 234A

Interest Imposed by the IT Department on default of advance tax – Section 234C