Income Tax · Glossary

Section 234B Interest

Interest payable when advance tax paid is less than 90% of assessed tax.

Section 234B of the Income Tax Act, 1961 charges 1% per month (or part thereof) interest on the shortfall when your total advance tax paid is less than 90% of your final assessed tax. Calculated from 1 April of the assessment year until the date of regular tax payment.

The Section 234B interest is independent of Section 234C interest — both can apply simultaneously if you both underpaid advance tax overall and missed quarterly instalments.

Worked example

Final assessed tax Rs. 1,20,000; advance tax paid Rs. 80,000 (under the 90% threshold of Rs. 1,08,000). Shortfall = Rs. 40,000. ITR filed 31 July 2027 → 4 months × 1% = Rs. 1,600 interest under 234B.

Practitioner tip

Even Rs. 1 below the 90% mark triggers full 234B on the entire shortfall — pay slightly above 90% on your March instalment if there is any uncertainty about your year-end income.

These definitions are educational. Tax laws change annually — verify with a Chartered Accountant before making GST or income-tax decisions.

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