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Microlesson · 5-min read

Interest under Sections 234A, 234B, and 234C

# Interest under Sections 234A, 234B, 234C

## Comparative Table

AspectSection 234ASection 234BSection 234C
PurposeInterest for delayed filing of ReturnInterest for non-payment / short payment of advance taxInterest for deferment of instalments of advance tax
Base AmountTax as per ROI (after adjustment of TDS, TCS, advance tax, etc.)Advance tax short paid / not paidDeferred amount (per instalment)
Rate1% per month or part thereof1% per month or part thereof1% per month or part thereof
PeriodFrom due date u/s 139(1) to actual date of filing returnFrom 1st April of AY to date of assessment u/s 143(1)/143(3)Per instalment period (see below)

## Section 234C — Period for Each Instalment

Due DateRequired %Period of Interest
15/0615%3 months
15/0945%3 months
15/1275%3 months
15/03100%1 month

## Key Exceptions / Reliefs

### Section 234C Relief

No interest u/s 234C if assessee has paid:

  • At least 12% of tax liability by 15th June instalment, AND
  • At least 36% of tax liability by 15th September instalment

(i.e., minor shortfalls of 3 percentage points are condoned for the first two instalments.)

### Section 234B Relief

No interest u/s 234B if assessee has paid 90% or more of his assessed tax as advance tax.

Worked example

### Example 1

Q: Mr. K's advance tax liability is ₹1,00,000. He paid: ₹12,000 by 15/06 and ₹36,000 by 15/09 (cumulative). Is 234C interest attracted on first two instalments?

Solution: Required by 15/06 = 15% = ₹15,000; paid ₹12,000 (12%). Required by 15/09 = 45% = ₹45,000; paid ₹36,000 (36%). Since he has paid at least 12% by 15/06 and at least 36% by 15/09, no 234C interest is leviable on first two instalments.

### Example 2

Q: Mr. X's total tax liability = ₹2,00,000. Advance tax paid during the year = ₹1,85,000. Is 234B applicable?

Solution: % of tax paid = 1,85,000 / 2,00,000 = 92.5%. Since ≥ 90%, no Section 234B interest is leviable.

⚠️ Common exam mistakes

  • Computing 234A interest on gross tax instead of net tax after deducting TDS/TCS/advance tax already paid.
  • Forgetting that 234C uses 12%/36% safe-harbour only for first two instalments — for 15/12 and 15/03 the strict 75%/100% applies.
  • Treating 1% as per annum rather than per month or part of a month — even one day's delay attracts a full month's interest.
  • Computing 234B from the date of filing of return — it actually runs from 1st April of the AY.
Reference: Sections 234A, 234B, 234C — Income-tax Act, 1961
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