Interest Imposed by the IT Department - Section 234C

Updated on: Jun 5th, 2024


5 min read

The income tax department strives to make it as easy and convenient for citizens to comply with advance tax payments. So, one has the option of paying it in 4 instalments over the financial year. 

However, if you still default, there are some consequences in the form of an interest penalty. Basically, Section 234C deals with interest to be levied on defaulters of advance tax instalment payments.

What Is An Advance Tax?

Advance tax means that applicable income tax should be calculated and paid in advance, that is, during the fiscal year rather than at the end of the year. Current laws require taxpayers to pay advance tax only when their income tax liability for the fiscal year exceeds Rs.10,000 after deducting TDS for the applicable fiscal year.

Due Dates For Paying Advance Tax

The income tax department expects you to pay your taxes on time. Otherwise, you will be charged interest for the late payment, at the time of filing your returns. Advance tax is paid on the following dates of a financial year:

On or Before

Normal  taxpayers 

Taxpayers opting for presumptive income u/s 44AD or 44ADA

15th June

Up to 15% of advance tax payable


15th September

Up to 45% of advance tax payable


15th December

Up to 75% of advance tax payable


15th March

Up to 100% of advance tax payable

Up to 100% of advance tax payable

Interest On Late Payment Of Advance Tax

The interest for late payment is set at 1% per month on the amount of tax due. It is calculated from the beginning of such a quarter till the date of actual payment of outstanding taxes. 

What Is The Difference Between Section 234B & Section 234C?

Section 234B imposes interest on taxpayers who fail to pay advance tax or pay less than 90% of the net tax payable during the assessment year. As a result, the need to pay interest under Section 234B arises after the end of the fiscal year until the date of tax payment.

Section 234C imposes interest on taxpayers who fail to pay their taxes on time during the fiscal year.

Example: For the FY 2023-24, if there is any deficit in payment of taxes, then Interest u/s 234C will be computed for delay till 31st Mar 2024, any delay in payment of taxes after 1st April 2024 till the date of such payment Section 234B interest will be computed while your file your ITR

Calculation Of Interest Under Section 234C

The interest on delayed payment of advance tax in case of a taxpayer other than the one opting for presumptive income u/s 44AD is as below:


Rate of Interest

Period of Interest


Amount on which interest is calculated

If the Advance Tax paid on or before June 15 is less than 15% of the Amount*

Simple interest @1% per month

3 months

15% of [Amount* (-)tax already deposited before June 15]

If Advance Tax paid on or before September 15 is less than 45% of the Amount*

Simple interest @1% per month

3 months

45% of [Amount* (-) tax already deposited before September 15]

If Advance Tax paid on or before December 15 is less than 75% of the Amount*

Simple interest @1% per month

3 months

75% of [Amount* (-) tax already deposited before December 15]

If Advance Tax paid on or before March 15 is less than 100% of the Amount*

Simple interest @1% per month

100% of [Amount* (-) tax already deposited before March 15]

*amount refers to assessed tax = Tax liability - TDS/TCS - Section 90 Relief

Section 234c

Criteria Under Which Advance Tax Interest Is Not Payable

  • No interest is payable if there is any shortfall in payment of advance tax due if it is on account of underestimation or failure to estimate the amount of capital gains or speculative income (lottery income, gambling income, etc). 
  • The taxpayer has paid in full, the tax payable on the income mentioned above while paying the remaining instalments of advance tax due, or if no instalment is due, the taxpayer pays them before the end of the financial year.

Illustration To Calculate Interest For Late Payment

Consider that your total tax liability for this financial year is Rs.100,000, and it needs to be paid in instalments as explained above. Assume there is no TDS here. If you made partial payments instead, you will be liable to pay interest as per the last column in the table below:

Payment Dates

Advance Tax payable

Total Advance Tax paid

Shortfall (Cumulative)

Penalties (Cumulative)

15th June




@1% * 3*10,000 = 300

15th September




@1% * 3 *20,000=600

15th December




@1% * 3 *40,000=1200

15th March




1% * 1 *50,000=500

The total interest payable is Rs 2,600.

Exceptions To Paying Interest Under Section 234C

If you meet any of the following criteria, you are exempt from paying advance tax and, as a result, interest under Section 234C is not assessed.

  • A resident senior citizen with no income under the 'PGBP' heading
  • If your net tax liability is less than Rs 10,000, no interest will be charged under Section 234C.

Remember, ClearTax automatically calculates the interest under Section 234 for you based on the amounts you enter and the dates.

For a better understanding, read more related articles:

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Frequently Asked Questions

Can I apply for a waiver of interest available in 234B and 234C?

Interest u/s 234B and 234C is computed automatically while filing ITR. Thus unless you have paid the advance tax in time you will not be able to reduce such interest.

What is the penalty for non payment of advance tax ?

Non payment or delay in payment of advance , You are liable to pay interest on such short payment at 1% per month till the date of such payment u/s 234C and 234B.

How much advance do I have to pay?

For advance tax calculation first you will have to determine the tax liability for the entire year based on projected income. After that advance tax needs to be paid off in the below proportion.

  1. By 15th June - 15% of assessed tax
  2. By 15th Sept - 45% of assessed tax
  3. By 15th Dec - 75% of assessed tax
  4. By 15th Mar - 100% of assessed tax

Quick Summary

The income tax department allows payment of advance tax in 4 instalments to facilitate compliance, with interest penalties for defaulters under Section 234C. Taxpayers must pay when tax liability exceeds Rs.10,000 in a fiscal year. Interest is levied at 1% per month for late payments. Section 234B deals with taxpayers failing to pay 90% of net tax, while Section 234C targets those not paying on time.

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