Every year, millions of Indians file their income-tax returns. If you miss a deadline, pay less advance tax than you should, or pay an instalment late, the Income Tax Department adds interest. The interest is not a penalty. It is a simple charge of 1% per month (or part of a month) on the amount that was unpaid or short. The rules sit in Sections 234A, 234B and 234C of the Income-tax Act. From 1 April 2026 these become Sections 423, 424 and 425 of the Income-tax Act, 2025, but for FY 2025-26 filings the old numbers still apply.
Interest under Sections 234A, 234B and 234C is a simple 1% per month (or part of a month) charge on tax that stayed unpaid because you filed your return late, paid less than 90% of your assessed tax as advance tax, or fell short on any advance-tax instalment.
Quick comparison: 234A vs 234B vs 234C
| Feature | Section 234A — late filing | Section 234B — short advance tax | Section 234C — instalment shortfall |
|---|---|---|---|
| When it applies | Return filed after the due date (31 July for most individuals; belated return last date 31 December 2026 for AY 2026-27) | Advance tax paid during the year is less than 90% of assessed tax, and total tax after TDS is Rs 10,000 or more | Any quarterly instalment is paid short of the required cumulative percentage |
| Rate | 1% per month or part of a month, simple interest | 1% per month or part of a month, simple interest | 1% per month on the shortfall — 3 months for the first three instalments, 1 month for the last |
| Period | Day after the due date until the date you file (or until assessment under Section 144 if you never file) | 1 April of the assessment year until the assessment is completed under Section 143(1) or regular assessment | Fixed period per instalment, not the actual delay |
| Rounding | Tax rounded down to the nearest Rs 100; interest rounded to the nearest Rs 10 | Same as 234A | Same as 234A |
| Safe harbour | None — any unpaid tax attracts interest | None — the 90% line is the only test | No interest if at least 12% of tax is paid by 15 June, or at least 36% by 15 September; no buffer for the December and March instalments |
| Late fee (Section 234F) | Separate — you can pay both | Separate | Separate |
| New number from 1 April 2026 | Section 423 | Section 424 | Section 425 |
What is Section 234A interest?
Section 234A charges interest when you file your return after the due date. For most individuals the due date is 31 July of the assessment year. For AY 2026-27 the belated return window runs till 31 December 2026, but filing late still attracts interest for the months of delay.
The interest is charged on the tax that stayed unpaid after deducting TDS, advance tax, self-assessment tax paid before the due date, relief and credits. One day of delay counts as a full month, because Rule 119A of the Income Tax Rules treats any part of a month as a whole month. If you never file at all, interest runs until the assessment is completed under Section 144. If you missed the due date completely, read our guide on belated ITR filing for AY 2026-27 — and if the belated window has also closed, an updated return (ITR-U) is still possible, with extra tax.
There is one important exception. If your full tax liability was already paid before the due date — through TDS, advance tax or self-assessment tax — no interest under Section 234A applies, even if the return itself is filed late. The department’s own tutorial states this clearly: full payment before the due date means no 234A interest.
How is Section 234A interest calculated?
- Work out the unpaid tax as on the day after the due date.
- Round the unpaid tax down to the nearest Rs 100.
- Count the months (or part of a month) from the day after the due date to the date you file.
- Apply 1% per month on the rounded unpaid tax.
- Round the interest to the nearest Rs 10.
Example: Section 234A
Suppose your unpaid tax after TDS is Rs 50,000. The due date is 31 July and you file on 10 October. The delay covers August, September and part of October — counted as 3 months. Interest = Rs 50,000 × 1% × 3 = Rs 1,500. On top of this, the late fee under Section 234F applies separately: Rs 1,000 if your total income is up to Rs 5 lakh, Rs 5,000 if it is above that.
What is the 90% rule under Section 234B?
Section 234B applies when the advance tax you paid during the financial year is less than 90% of the tax finally assessed. It also needs the total tax payable after TDS to be Rs 10,000 or more — below that, no advance tax is due at all under Section 208, so neither 234B nor 234C applies.
The shortfall is measured on the assessed tax, not on your estimate at the start of the year. Interest runs at 1% per month or part of a month on the shortfall, from 1 April of the assessment year until the date of determination under Section 143(1) or the regular assessment. It is simple interest, not compound interest.
Example: Section 234B
Suppose your assessed tax is Rs 5,00,000 and you paid Rs 3,50,000 as advance tax — that is 70%, below the 90% line. The shortfall is Rs 5,00,000 − Rs 3,50,000 = Rs 1,50,000. If the assessment is completed on 30 September (6 months from 1 April), interest = Rs 1,50,000 × 1% × 6 = Rs 9,000. Paying the balance as self-assessment tax before filing keeps the interest period short, so it pays to settle the balance as soon as you know it.
How is Section 234C interest calculated?
Section 234C applies when an advance-tax instalment is short. Advance tax must be paid in four instalments, on cumulative percentages of your total tax:
| Due date | Cumulative tax that must be paid |
|---|---|
| 15 June | 15% |
| 15 September | 45% |
| 15 December | 75% |
| 15 March | 100% |
Each instalment is judged on its own. Paying extra in a later instalment does not cancel the interest for an earlier shortfall.
The Act gives a small buffer for the first two instalments only. No interest is charged for the June instalment if you paid at least 12% of the total tax by 15 June (instead of the full 15%), and no interest for the September instalment if you paid at least 36% by 15 September (instead of 45%). There is no buffer for the December and March instalments — those need the full 75% and 100%.
Interest is charged at 1% per month on the shortfall: for 3 months for each of the first three instalments, and for 1 month for the last instalment. The interest is also waived when the shortfall is caused by capital gains, lottery winnings or income from a new business that you could not have estimated earlier, provided you pay the tax on that income in the next instalment or by 31 March.
Worked example: Section 234C
Assume your total tax for the year is Rs 4,00,000.
| Instalment | Due date | Required | Actually paid (cumulative) | Shortfall | Interest |
|---|---|---|---|---|---|
| 1st | 15 June | 15% = Rs 60,000 | Rs 30,000 (7.5% — below the 12% safe harbour) | Rs 30,000 | 3 × 1% × Rs 30,000 = Rs 900 |
| 2nd | 15 September | 45% = Rs 1,80,000 | Rs 1,20,000 (30% — below the 36% safe harbour) | Rs 60,000 | 3 × 1% × Rs 60,000 = Rs 1,800 |
| 3rd | 15 December | 75% = Rs 3,00,000 | Rs 2,40,000 (60% — no buffer here) | Rs 60,000 | 3 × 1% × Rs 60,000 = Rs 1,800 |
| 4th | 15 March | 100% = Rs 4,00,000 | Rs 3,90,000 (97.5% — no buffer here) | Rs 10,000 | 1 × 1% × Rs 10,000 = Rs 100 |
Total interest under Section 234C = Rs 900 + Rs 1,800 + Rs 1,800 + Rs 100 = Rs 4,600.
Notice the June instalment: paying Rs 30,000 was only 7.5% of the tax, below the 12% safe harbour, so interest applied. If the same taxpayer had paid Rs 48,000 (12%) by 15 June, no interest would have been charged for that instalment even though the full 15% target was not met.
How to avoid interest under 234A, 234B and 234C
- Pay your tax before the due date. If TDS and advance tax together cover the whole liability before 31 July, Section 234A never applies — even if the return is filed late.
- Aim for 100% advance tax, not just 90%. Paying at least 90% of your estimated tax removes the 234B risk, and paying the full amount removes the 234C risk too.
- Follow the instalment schedule. Pay at least 12% by 15 June and 36% by 15 September, then meet the full 75% by 15 December and 100% by 15 March. Our advance tax December instalment guide explains the 75% milestone in detail.
- Pay the balance the moment you know it. If you realise a shortfall before an instalment due date, pay it at once through a challan. The interest clock only counts the shortfall that existed on the due date.
- Check your TDS certificates early. A wrong TDS figure can create an apparent shortfall. Get it fixed with your employer or bank before the March instalment.
- File the return on time. Even a small unpaid balance stops growing the day you file. If you missed 31 July, file a belated return before 31 December 2026 to keep the 234A period as short as possible.
Frequently asked questions
What is Section 234A interest?
It is interest charged at 1% per month (or part of a month) on tax that stayed unpaid after the return filing due date because the return was filed late. It applies from the day after the due date until the date you file, and it is simple interest, not compound interest.
How much interest is charged for filing ITR late?
The interest is 1% per month on the unpaid tax, counted from the day after the due date (31 July for most individuals) up to the day you file. Any part of a month counts as a full month. For example, Rs 50,000 of unpaid tax filed 3 months late attracts Rs 1,500 of interest.
Is Section 234A interest charged if I already paid all my tax before the due date?
No. If your total tax liability was fully settled before the due date through TDS, advance tax or self-assessment tax, no interest under Section 234A is charged even if you file the return late. The late fee under Section 234F can still apply.
What is the 90% rule under Section 234B?
You must pay at least 90% of your assessed tax as advance tax during the financial year. If the advance tax paid is less than 90% and your total tax after TDS is Rs 10,000 or more, interest under Section 234B is charged at 1% per month on the shortfall from 1 April of the assessment year.
How is Section 234C interest calculated?
For each instalment, find the shortfall against the required cumulative percentage — 15%, 45%, 75% and 100% by 15 June, 15 September, 15 December and 15 March. Multiply the shortfall by 1% per month: 3 months for the first three instalments and 1 month for the last. No interest is charged if at least 12% was paid by June or 36% by September.
Can interest under Sections 234A, 234B and 234C be waived?
Generally no. The interest is mandatory. It can be reduced or waived only in rare cases under a specific CBDT circular, usually when the taxpayer can show genuine hardship or a mistake by the department. You cannot ask the assessing officer to waive it as a routine matter.
What is the difference between Sections 234A, 234B and 234C?
Section 234A covers late filing of the return. Section 234B covers paying less than 90% of the assessed tax as advance tax. Section 234C covers missing or paying short an advance-tax instalment. All three charge the same rate, 1% per month, but they differ in what triggers them and how the period is counted.
Do I pay both late fee and interest if I file late?
Yes. The late fee under Section 234F — Rs 1,000 if your total income is up to Rs 5 lakh, Rs 5,000 if it is above — is separate from the interest under Section 234A. Both are payable if you miss the filing deadline, and the interest is calculated on the unpaid tax only.
Conclusion
Interest under Sections 234A, 234B and 234C is a simple 1% per month charge on tax that stayed unpaid because of late filing, short advance tax, or a missed instalment. The calculation is straightforward: round the tax down to the nearest Rs 100, count the months (any part of a month counts as a full month), apply 1%, and round the interest to the nearest Rs 10. Pay your tax early, meet the 90% advance-tax rule, and follow the instalment schedule — 12% by June, 36% by September, 75% by December and 100% by March — and you will pay only the tax you owe, not extra interest.
Official sources
- Interest and Fees under the Income-tax Act — incometaxindia.gov.in (PDF)
- Income Tax Department — incometax.gov.in
- CBDT — cbic.gov.in
Reviewed by Asuthod Rathod, CA. Last updated: 6 November 2026.
Disclaimer: This article is for general information only and is not tax advice. Tax rules change, and your situation may differ. Please check the official Income Tax Department website or consult a qualified tax professional before acting.
Editorial byline for eircicai income tax guides — covering the Income Tax Act, 2025, section renumbering, regime comparison, and deductions. Content is reviewed by Asuthod Rathod, CA.