Income Tax Interest Calculator - Section 234A, 234B & 234C

What is Interest Under Sections 234A, 234B, and 234C?

The Income Tax Act imposes different types of interest charges for various defaults and delays in tax compliance. These provisions ensure timely payment and filing of income tax returns by taxpayers across India.

Computation Method: Rule 119A Explained

Before calculating interest under any section, it's crucial to understand Rule 119A of the Income Tax Rules, which prescribes the standardized method for computing interest payable by taxpayers or the Central Government.

Key Principles of Interest Calculation

• For annual interest calculations, the period is rounded off to whole months, ignoring any fraction of a month
• For monthly interest calculations, any part of a month is treated as a full month
• The tax amount is rounded off to the nearest multiple of ₹100, ignoring fractions below ₹100

Section 234A: Interest for Delay in Filing Returns

When Does Section 234A Apply?

Interest under Section 234A is charged when you file your income tax return after the prescribed due date, file an updated return, or submit a return in response to a notice under Section 142(1).

Calculation Period

Interest begins from the day immediately after the due date for filing the return and continues until:

• The actual date of filing the return, or
• The date of completion of assessment under Section 144 (if no return is filed)

Tax Amount Subject to Interest

Interest is calculated on the tax liability as determined under Section 143(1) or regular assessment, after deducting:

• Advance tax paid
• Tax Deducted at Source (TDS) and Tax Collected at Source (TCS)
• Relief claimed under Sections 89, 90, 90A, or 91
• Tax credit under Sections 115JAA or 115JD

Section 234B: Interest for Default in Advance Tax Payment

Who Must Pay Advance Tax?

As per Section 208, advance tax is mandatory for any taxpayer whose estimated tax liability for the financial year exceeds ₹10,000.

When is Section 234B Interest Levied?

• Complete failure to pay advance tax despite liability exceeding ₹10,000
• Advance tax paid is less than 90% of the assessed tax liability

Calculation Period

Interest is charged from 1st April of the assessment year until:

• The date of determination of income under Section 143(1), or
• The date of regular assessment completion

Assessed Tax Definition

Assessed tax means total tax liability determined under Section 143(1) or regular assessment, minus:

• TDS and TCS credits
• Relief under Sections 89, 90, 90A, 91
• Tax credit under Sections 115JAA or 115JD

Section 234C: Interest for Deferment of Advance Tax Instalments

Advance Tax Payment Schedule

When is Section 234C Interest Charged?

Interest is levied when the advance tax paid in any instalment is less than the required percentage, with some important exceptions:

Minimum Payment Thresholds

Key Takeaways for Taxpayers

• Always file your income tax return before the due date to avoid Section 234A interest
• Ensure advance tax payments reach at least 90% of total liability to avoid Section 234B interest
• Pay advance tax instalments on time and in correct proportions to prevent Section 234C charges
• Any fraction of ₹100 in tax amount is ignored, and any part of a month counts as a full month
• Interest is calculated as simple interest at 1% per month across all three sections
• Use our calculator above to estimate your interest liability accurately and plan your tax payments