Interest on Short or Non Payment of Advance Tax (Updated) A.Y. 2018-19

Advance Tax calculated on estimate income should be nearest. But if there is short payment more than 10% or non payment or late payment of advance tax, interest shall be payable on the amount of shortfall.

The following chart will help you to calculate interest u/s 234B and u/s 234C easily step by step. We will cover the provision with all amendments up to A.Y. 2018-19 & A.Y.2017-18.

[Assessed Tax – Advance Tax Paid – TDS and TCS – Double Taxation Relief u/s 90, 90A or 91 – Tax credit for MAT]

Check due dates for advance tax payment to avoid penal interest

Interest for ShortPayment or Non-Payment of Advance Tax

Interest shall be payable @ 1% for every month or part thereof from April 1 of the assessment year to the date of determination of total income.

Interest shall be payable upto the date of filing of return. The assessee should deposit interest with self assessment tax.

Interest for Deferment of Advance tax

If any of the advance tax installment are not paid or paid less than simple interest shall be payable for deferment of advance tax as follows u/s 234C.

The following chart will help you to calculate the interest for deferment of Advance Tax.

Deferment Interest
For all Assessees 
If the tax paid upto 15th June is less than 15%* Simple interest on the amount of shortfall @1% p.m. for 3 months
If the tax paid unto 15th Sept is less than 45%**
If the tax paid unto 15th Dec is less than 75%
Deferment Interest
For all business/professional assessees declaring income under estimated income scheme u/s 44AD or 44ADA
If the tax paid upto 15th March is less than 100% of the tax due Simple interest on the amount of shortfall @1% p.m.

*Interest is not payable if the tax paid is more than 12%

**Interest is not payable if the tax paid is more than 36%

Points to Keep in Mind Before Calculating Advance Tax Interest

1) Interest u/s shall be payable if the assessee deposits the entire tax by 3rd instalment.

2) If the advance tax is less than Rs.10,000 interest u/s 234C shall not be payable.  Check am I liable to pay advance tax?

3) To calculating interest on short fall/non-payment/ deferment of advance tax ignore any fraction of Rs.100.

4) if there is shortfall of tax by under estimate of any capital gains tax or winning from lotteries, crossword puzzles, races etc. then no interest u/s 234C will be applicable.

Useful Articles on Advance Tax

How to Calculate Advance Tax?

Advance Tax Due Dates

Income Tax Slabs / Advance Tax Rates

How to Deposit Advance Tax?

Who is Liable to Pay Advance Tax?

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