Penalties Section 234B — Interest for Default in Payment of Advance Tax
Section 234B — Interest for Default in Payment of Advance Tax
Income Tax Act 1961 — 234B
1% per month on the shortfall in advance tax if advance tax paid is less than 90% of assessed tax.
The Penalty
1% per month or part thereof (simple interest)
- Cap
- None
- Calculation base
- Assessed tax minus TDS minus advance tax paid (the shortfall from 90% threshold)
- Period
- From 1 April immediately following the financial year to the date of actual payment (or assessment)
When does this apply?
Advance tax paid by 31 March is less than 90% of assessed tax for the year
Calculate this amount
This estimate applies only the rate and caps published in the authored rule for this page.
₹2,000₹1,00,000 × 1% × 2 months
Worked examples
| Scenario | Calculation | Result |
|---|---|---|
| Assessed tax ₹5,00,000; advance tax paid ₹4,00,000 (80%); paid remaining on 31 Aug | Shortfall = ₹5,00,000 − ₹4,00,000 = ₹1,00,000. Interest = ₹1,00,000 × 1% × 5 months = ₹5,000 | ₹5,000 |
| No advance tax paid; assessed tax ₹2,00,000; paid in full on 31 Jul (4 months after 31 Mar) | ₹2,00,000 × 1% × 4 = ₹8,000 | ₹8,000 |
How it is levied
Self-assessed by taxpayer; also levied by AO. Triggered automatically when ITR is processed.
CA review
Whether s.234B interest is calculated on the GROSS shortfall or only on the NET shortfall after TDS — it is calculated on assessed tax minus TDS minus advance tax (i.e., net tax paid amount). Confirm the base for your computation. For tax year 2026-27 onward: confirm 1% p.m. rate and 90% threshold under s.424, ITA 2025.