Penalties Section 234C — Interest for Deferment of Advance Tax Installments
Section 234C — Interest for Deferment of Advance Tax Installments
Income Tax Act 1961 — 234C
The Penalty
1% per month
- Cap
- None
- Calculation base
- Shortfall from required cumulative advance tax percentage at each installment due date
- Period
- Varies by installment: 3 months for Q1/Q2/Q3 shortfall; 1 month for Q4 shortfall
When does this apply?
Cumulative advance tax paid at any installment due date falls below the required percentage of assessed tax
Calculate this amount
This estimate applies only the rate and caps published in the authored rule for this page.
Worked examples
| Scenario | Calculation | Result |
|---|---|---|
| Assessed tax ₹4,00,000. Paid ₹0 by Q1 (shortfall 15%). | Shortfall = ₹60,000. Interest = ₹60,000 × 1% × 3 = ₹1,800 | ₹1,800 |
| Assessed tax ₹4,00,000. Paid ₹0 by Q3 (shortfall 75%). | Shortfall = ₹3,00,000. Interest = ₹3,00,000 × 1% × 3 = ₹9,000 | ₹9,000 |
How it is levied
Self-assessed when filing ITR; AO levies on assessment.
Whether s.234C applies to taxpayers whose only income is business income with no prior-year tax history (first-year startups) — s.234C(1) proviso exempts taxpayers who pay the full advance tax installment by the last installment date (15 Mar) even if earlier installments were missed. Confirm applicability for your specific income type. For tax year 2026-27 onward: confirm 1% p.m. rate and instalment percentages under s.425, ITA 2025.