Penalties Section 234C — Interest for Deferment of Advance Tax Installments
Section 234C — Interest for Deferment of Advance Tax Installments
Income Tax Act 1961 — 234C
1% per month for 1–3 months on each quarterly installment shortfall of advance tax.
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.
₹450₹15,000 shortfall × 1% × 3 months
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.
⚠ VERIFY
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.