Section 234C of the Income Tax Act: Interest on Late Advance Tax

Last updated: Oct 2026

Section 234C charges interest when you miss an advance tax instalment, even if you pay the full tax by 31 March. The rate is 1% a month on the shortfall, and the months are fixed.

• Instalments: 15% by 15 June, 45% by 15 September, 75% by 15 December, 100% by 15 March
• Interest period: 3 months for the first 3 instalments, 1 month for March
• Safe harbours: no interest if you paid at least 12% by 15 June or 36% by 15 September
• Exempt: resident senior citizens with no business income, and tax liability below Rs. 10,000

• Example: a Rs. 2,00,000 estimate with late payments costs Rs. 1,800

  
  

Estimate your year's tax in April, split it into 4 payments and pay each by its date. A shortfall costs 1% a month.

Section 234C is the provision that charges interest for deferring advance tax instalments. Advance tax is tax paid during the year, in instalments, when your tax after Tax Deducted at Source (TDS) is Rs. 10,000 or more.

The section works by comparing what you paid by each date with the cumulative share due. Interest runs on the gap at 1% a month, as simple interest. It is separate from Section 234B, which tests the year-end total.

Four dates apply, and the interest period is fixed by the date, not by when you actually pay.

A person who opts for the presumptive scheme under Section 44AD or 44ADA pays in one instalment, 100% by 15 March. A resident senior citizen with no business income need not pay advance tax.

Take each date, find the shortfall against the cumulative amount due, and multiply by 1% and the months.
Formula used: Interest = shortfall × 1% × months, unless the safe harbour applies. Shortfall = cumulative percentage × tax due − tax paid by that date.
 

Ignore any fraction of Rs. 100 in the tax on which interest is calculated (Rule 119A). The Income-tax Act, 2025 renumbers the section as Section 425 from Tax Year 2026-27. Instalment dates and rates are unchanged.
 

Capital gains and other income that you could not foresee get relief. No interest applies to the shortfall that comes from such income if you pay the tax in the next instalment, or by 31 March.

Consider Sunita, a 39-year-old consultant in Jaipur with a household income of Rs. 1.5 lakh a month and a CIBIL Score of 751. Her estimated tax is Rs. 2,00,000 after TDS.

Sunita paid the full tax by 15 March, yet she owes Rs. 1,800 under Section 234C. If she had paid Rs. 24,000 by 15 June and Rs. 72,000 by 15 September, she would owe nothing.

Five steps keep you under the safe harbours.

1. Estimate your tax for the year in April, after TDS.
2. Pay at least 12% by 15 June and 36% by 15 September.
3. Pay up to 75% by 15 December and 100% by 15 March.
4. Pay each instalment on e-Pay Tax, as the guide to the income tax challan explains.
5. Update the estimate whenever a large gain or bonus arrives.
    

Trade-off: paying 12% and 36% avoids interest, but a bigger year-end bill then falls on you in one go.

Bajaj Finance reviews income documents and returns, so unpaid tax and interest in your records can raise questions during assessment.

Approval timelines can extend where returns show unpaid tax, and minimum income thresholds can differ by city. Check your home loan eligibility.