Advance tax and Section 234B / 234C interest, explained

Advance tax is income tax paid in the year the income is earned, in installments, rather than as a lump sum at filing. It applies when the estimated tax liability for the year, after TDS, is ₹10,000 or more. Falling short triggers interest under Sections 234B and 234C.

The installment schedule

For most taxpayers the cumulative advance tax payable is 15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March. Taxpayers opting for the presumptive schemes (44AD / 44ADA) pay the whole amount in a single installment by 15 March.

Section 234C — deferment interest

234C charges 1% per month for three months on any shortfall at each of the first three installment dates, and 1% for one month on the shortfall at the final date. It is computed installment by installment against the cumulative percentage due, with a tolerance band (paying at least 12% by June and 36% by September avoids 234C for those dates).

Section 234B — default interest

234B applies when the advance tax actually paid during the year is less than 90% of the assessed tax. It charges 1% per month on the shortfall from 1 April of the assessment year until the date the balance is paid (usually at filing). 234B and 234C can both apply to the same year — 234C for the timing within the year, 234B for the year-end shortfall.

How FinRace AI helps

The CA workspace generates the advance-tax installment schedule and computes 234B / 234C interest deterministically from the figures you enter — the month-count and percentage logic is in code, not an LLM estimate. It calculates; the CA advises on the payment plan.