Section 234C — Interest for Deferment of Advance Tax Instalments

Section 234C levies interest on taxpayers who defer their advance tax payments below the required percentage at each instalment date. Unlike Section 234B (for shortfall in total advance tax) and Section 234A (for late return filing), Section 234C specifically targets each missed or under-paid instalment. Here is the complete guide.

Advance Tax Instalment Schedule (Non-Corporate Taxpayers)

• By 15 June: At least 15% of the estimated tax liability for the year
• By 15 September: At least 45% (cumulative) of estimated tax liability
• By 15 December: At least 75% (cumulative) of estimated tax liability
• By 15 March: 100% of estimated tax liability

For companies:

• By 15 June: 15%; By 15 September: 45%; By 15 December: 75%; By 15 March: 100%

Interest Calculation — Section 234C

• Rate: 1% simple interest per month (or part of month)
• Period: 3 months for each of the first three instalments; 1 month for the fourth instalment (15 March)
• Base: On the shortfall from the required cumulative percentage
• Example: If 45% was due by 15 September but only 30% paid — interest is on the 15% shortfall × 1% × 3 months

Exceptions — No Section 234C Interest

• Capital gains: If capital gain arises after the instalment date — advance tax can be paid in the remaining instalments without Section 234C interest on earlier instalments
• Lottery/gambling winnings: Same as capital gains — can pay in remaining instalments
• Casual income: If income arises after the instalment due date — pay in remaining instalments
• Section 234C does not apply if tax payable after TDS credit is below ₹10,000 (de minimis threshold)

Section 234B — Annual Shortfall Interest

Note: Section 234C is separate from Section 234B. Section 234B applies if the total advance tax paid by 31 March is less than 90% of the final tax liability — charged at 1% per month from April 1 to the date of filing the return.

Conclusion

Section 234C interest is avoidable with proper advance tax planning and timely instalment payments. SPOTON prepares estimated income computations, calculates advance tax at each instalment date and advises clients on timely payments across Kerala. Contact us for expert advance tax planning services.