How to calculate interest under section 234B and 234C

In our last article we have discussed due dates for payment of advance tax and what happens when advance tax is not paid on or before the due date. In this article, we will be discussing how to calculate interest under section 234B and 234C.

If for a financial year, tax liability of an assessee is Rs 10,000 or more then tax department in India required them to pay advance tax in installments on or before the due dates.

This means, all assessee including freelancers, self employed businessmen, salaried employees and corporate are required to pay advance tax where the tax liability of the financial year is Rs 10,000 or more.

interest calculation applicable to advance tax under section 234B and 234C

If you are salaried and your taxable income during the financial year is largely from salary income, it is likely all your taxes have been taken care of by TDS (tax deducted at source). Other than salary income, if you have earned income under any other head (like rent income or income from business or profession) which is liable to tax then you may liable to pay advance tax.

For calculation of advance tax part of a month is rounded off to a full month.

While calculating interest, advance tax is also rounded off in such a way that any fraction of a hundred is ignored.

If short payment of advance tax is due to retrospective amendments in tax law or because of subsequent court ruling, interest under section 234B cannot be imposed.

Calculation of Interest under Section 234B – Applicable to Individual

  Amount in Rupees Remarks
Tax liable 81,576
Less: TDS (12,510)
Assessed tax (81576-12510) 69,066
90% of assessed tax (90% of 69066) 62,159
Advance tax paid during FY 2014-2015
On September 15th 2014 4,800
On December 15th 2014 11,000
On March 15th 2015 18,000
On March 16th 2015 22,000
55,800 55,800
( Assessed tax minus advance tax)
13,266 Since advance for the financial year is less than 90% of the assessed tax, The person is liable to pay interest under section 234B of Income tax act @ 1% simple interest.
Round off 13,200 rounded off to nearest 100
Date of assessment order 20th January of the assessment year
April to January 10 months
Interest u/s 234B

Calculation of Interest under Section 234C – Applicable to Individual

Assessed Tax                                                                                       76,426
Less: TDS                                                                                       (12,510)
Assessed Tax after TDS                                                                                       63,916
30% of Assessed Tax                                                                                       19,175
Interest Calculation U/S 234C
  On September 15th 2014 On December 15th 2014 On March 15th 2015
Instalment Payments




Advance tax liability


(30% of 63916)


(60% of 63916)


(100% of 63916)








Rounded of amount as per rule 119A




Rate of Interest u/s 234B

1% per month

1% per month

1% per month

Period of default




Amount of interest







Total Interest Payable U/S 234C



One thought on “How to calculate interest under section 234B and 234C

  1. CS Muralidharan

    Whether fees paid to an auditor for preparing and filinfg IT Return can be claimed as exemption?


Leave a Reply

Your email address will not be published. Required fields are marked *