Interest under 234B of Income Tax Act is 1% a month charged when the advance tax you paid by 31 March is less than 90% of the tax you finally owe, counted from 1 April until you pay. Two neighbours often come with it: 234A, for filing the return after the due date with tax unpaid, and 234C, for paying less than the required share by each instalment date.
All three are simple interest at 1% a month, and a month only partly gone still attracts a whole month of interest. This page explains each for FY 2025-26 (AY 2026-27), then works one case through all three. For the instalment rules behind them, see the advance tax hub.
Quick facts
234A
Late return: 1% a month on unpaid tax, starting the day after the due date234B
Advance tax under 90%: 1% a month from 1 April234C
Instalment shortfall: 1% a month, 3 months per date, 1 month for MarchPart month
Counted as a full monthRounding
Tax is rounded down to the nearest ₹100 before interestUnder the 2025 Act
Same three charges, new section numbers
234A, 234B and 234C side by side
| Section | Trigger | Amount interest is on | Period |
|---|---|---|---|
| 234A | Return filed after the due date (31 July for most individuals) | Tax on total income less advance tax, TDS and TCS | Starts the day after the due date, ends on the filing date |
| 234B | Advance tax paid is below 90% of assessed tax | Assessed tax less advance tax | From 1 April of the assessment year to the date of payment or assessment |
| 234C | Shortfall against 15%, 45%, 75% or 100% by each instalment date | The shortfall at each date | 3 months for June, September and December; 1 month for March |
Each is worked out separately, so one delay can bring two or three charges. They are compensation for the government's lost use of money, not penalties, and cannot be waived by the portal.
How interest u/s 234B of Income Tax Act is calculated
First find the assessed tax: tax on total income less TDS and TCS. If the advance tax you paid by 31 March is 90% or more of that figure, there is no 234B interest at all. If it is less, interest runs on the full gap, not just the part below 90%.
The clock starts on 1 April of the assessment year, so 1 April in FY 2026-27 for FY 2025-26 income. It stops when the gap is paid as self-assessment tax, usually just before you file. If you pay part of the gap first, interest on the rest continues until it too is paid. Payments made between 16 March and 31 March count as advance tax for this test.
234C of Income Tax Act: the instalment test
| Date | Required by then | Safe harbour | Interest on shortfall |
|---|---|---|---|
| 15 June | 15% | 12% paid | 3% |
| 15 September | 45% | 36% paid | 3% |
| 15 December | 75% | None | 3% |
| 15 March | 100% | None | 1% |
Interest u/s 234C of Income Tax Act works differently under 44AD or 44ADA: only the March test applies: 1% on whatever is short of 100% by 15 March. If the shortfall comes from capital gains, lottery income or similar income that arose after a date, and you paid its tax in the next instalments, those earlier dates carry no 234C on that part.
234A of Income Tax Act: the late return charge
234A applies only when tax is still unpaid on the due date. If your TDS, advance tax and self-assessment tax paid before the due date cover the full liability, a late return brings the 234F fee but no 234A interest. For AY 2026-27 the due date is 31 July for ITR-1 and ITR-2 filers; see ITR due dates for other cases and the late filing fee for 234F.
Worked example: all three interest charges in one case
Ravi is a landlord and investor, files ITR-2, and has no business income. His tax on total income for FY 2025-26, after TDS, is ₹2,00,000. He paid advance tax of ₹50,000 on 15 September and ₹50,000 on 15 December, nothing else. He pays the balance ₹1,00,000 and files on 25 September in FY 2026-27, after the 31 July due date.
234C. June: needed ₹30,000 (15%), paid nil, below the 12% safe harbour: ₹30,000 × 3% = ₹900. September: needed ₹90,000, paid ₹50,000, below 36% (₹72,000): ₹40,000 × 3% = ₹1,200. December: needed ₹1,50,000, paid ₹1,00,000: ₹50,000 × 3% = ₹1,500. March: needed ₹2,00,000, paid ₹1,00,000: ₹1,00,000 × 1% = ₹1,000. Total ₹4,600.
234B. Advance tax ₹1,00,000 is under 90% of ₹2,00,000. Gap ₹1,00,000, from 1 April to 25 September: April to September is 6 months. ₹1,00,000 × 6% = ₹6,000.
234A. Unpaid tax ₹1,00,000 from 1 August to 25 September: 2 months. ₹1,00,000 × 2% = ₹2,000.
Total interest: ₹4,600 + ₹6,000 + ₹2,000 = ₹12,600, paid with the ₹1,00,000 balance.
Interest on advance tax under the 2025 Act
In tax year 2026-27, the Income-tax Act, 2025 keeps the same three charges at 1% a month, with the same 90% test, instalment safe harbours and part month rule. Only the section numbers differ, so tax software and challans for that year show the new references. FY 2025-26 interest is still worked out under 234A, 234B and 234C of the 1961 Act. To stay clear of these charges in tax year 2026-27, keep to the advance tax due dates.
Ways to keep 234B and 234C interest low
| Cause | What helps |
|---|---|
| Underestimating income in June | Revise the estimate before each date and top up |
| Ignoring interest from deposits | Count interest that accrues even if not credited, and the TDS on it |
| Paying the full balance only at filing | Pay at least 90% by 31 March to stop 234B |
| A sale of shares in January | Pay its tax by 15 March |
| Assuming a refund elsewhere offsets it | Interest is charged per year and per section; pay on time |
This explains the general rules for interest; your own figures may differ. Rules are revised from time to time, so ask a chartered accountant about your figures, or check the department's own portal.
Sources we checked
- Income-tax Act, 1961, section 234A
- Income-tax Act, 1961, section 234B
- Income-tax Act, 1961, section 234C
- Income-tax Rules, 1962, rule 119A
- Income-tax Act, 2025
Frequently asked questions
What does 234B of Income Tax Act charge?
Sec 234B of Income Tax Act charges 1% a month when your advance tax, counted up to 31 March, falls short of 90% of the assessed tax. Interest runs from 1 April of the assessment year until the shortfall is paid.
What is the difference between 234B and 234C of Income Tax Act?
234B looks at the year as a whole: did you pay at least 90% by 31 March. 234C looks at each instalment date: did you pay 15%, 45%, 75% and 100% on time. Both can apply together.
Is interest under 234A charged if all tax was paid?
No. 234A runs only on tax unpaid after the due date. A late filer with no tax due pays only the 234F fee.
Does interest on advance tax apply to salaried people?
Only if they had other income with tax of ₹10,000 or more not covered by TDS. Salary TDS alone, if correct, leaves no gap.
Are part months counted for 234B and 234C?
Yes. Even a single day into a month is billed as the full month, and the tax is first rounded down to the nearest ₹100.