Interest under sections 423, 424 and 425: the old 234A, 234B and 234C
Three kinds of interest are added when income tax is paid late: for a late return, for advance tax not paid, and for instalments paid short. The rates are the same as before; only the section numbers changed.
Reviewed by Vijay Dhawan, Managing Partner, LexVerge LLP, on · Published
Quick answer
From tax year 2026-27 the three interest sections are renumbered: 234A is section 423 (late return), 234B is section 424 (advance tax not paid or under 90%) and 234C is section 425 (instalments paid short). Sections 423 and 424 charge simple interest of 1% a month. Section 425 charges 3% on each shortfall at the June, September and December dates and 1% at the March date.
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The three charges at a glance
| Section 423 (old 234A) | Section 424 (old 234B) | Section 425 (old 234C) | |
|---|---|---|---|
| Charged for | Return filed after the due date, or not filed | Advance tax not paid, or paid at less than 90% of the assessed tax | An advance tax instalment paid short or late |
| Rate | 1% a month, simple interest | 1% for every month or part of a month | 3% on the June, September and December shortfalls; 1% on the March shortfall |
| Runs from | The day after the due date of the return | 1 April after the tax year | Each instalment date |
| Runs to | The date the return is filed | The date the tax is paid or the income is determined | Fixed: no further running |
| On what | Tax on total income, less tax already paid | The shortfall in advance tax | The shortfall at each date |
For FY 2025-26 and earlier years the same interest is charged under sections 234A, 234B and 234C of the 1961 Act.
Who is liable to advance tax at all
Sections 424 and 425 only apply if you had to pay advance tax. Under section 404 that is anyone whose tax for the year, after TDS and TCS, is ₹10,000 or more.
A resident senior citizen aged 60 or above with no business or professional income is exempt, and pays any balance with the return. The dates and percentages are in our advance tax guide.
Section 424: advance tax not paid or under 90%
If you paid no advance tax, or paid less than 90% of the assessed tax, interest runs at 1% for every month or part of a month from 1 April after the tax year, on the amount by which advance tax fell short.
- Assessed tax is the tax on your total income less TDS, TCS and foreign tax relief.
- Paid 90% or more as advance tax? No interest under this section.
- Tax paid as self-assessment tax before filing stops the interest on that amount from the day you pay it. Pay early in April, not on the last day of July.
Section 425: instalments paid short
| Due date | Advance tax due by then | Interest on the shortfall |
|---|---|---|
| 15 June | 15% of the tax due | 3% |
| 15 September | 45% | 3% |
| 15 December | 75% | 3% |
| 15 March | 100% | 1% |
- Safe limits. No interest for June if you paid at least 12% by 15 June, and none for September if you paid at least 36% by 15 September.
- Presumptive taxpayers under section 58 (old 44AD and 44ADA) pay everything by 15 March. A shortfall on that date costs 1%.
- Income you could not foresee. No interest where the shortfall comes from capital gains, dividend income, lottery-type winnings or business income arising for the first time, as long as the tax on it is paid in the remaining instalments or by 31 March.
Section 423: return filed late
If the return is filed after the due date, interest of 1% a month runs from the day after the due date to the day you file, on the tax still unpaid after advance tax, TDS and reliefs.
If nothing is payable with the return, there is no interest under this section. The late filing fee is separate and applies even then.
Worked example
A consultant owes ₹1,00,000 for the year after TDS. She pays no advance tax, and pays the full amount on 31 July while filing on time.
| Charge | Working | Interest |
|---|---|---|
| Section 425, June | 3% of ₹15,000 | ₹450 |
| Section 425, September | 3% of ₹45,000 | ₹1,350 |
| Section 425, December | 3% of ₹75,000 | ₹2,250 |
| Section 425, March | 1% of ₹1,00,000 | ₹1,000 |
| Section 424 | 1% of ₹1,00,000 for April to July, 4 months | ₹4,000 |
| Section 423 | Return filed on time | Nil |
| Total | ₹9,050 |
Paying the ₹1,00,000 in four instalments on time would have cost nothing. The free advance tax calculator works out your instalments and this interest.
Frequently asked questions
What are the new sections for 234A, 234B and 234C?
Sections 423, 424 and 425 of the Income-tax Act, 2025, from tax year 2026-27. Section 423 covers a late return, 424 covers advance tax not paid or under 90%, and 425 covers instalments paid short.
What is the interest rate under section 424 (old 234B)?
1% simple interest for every month or part of a month, from 1 April after the tax year, on the shortfall in advance tax.
How is interest under section 425 (old 234C) calculated?
3% of the shortfall at each of the 15 June, 15 September and 15 December instalments, and 1% of the shortfall at 15 March.
When is no interest charged on an advance tax shortfall?
When you paid at least 12% by 15 June and 36% by 15 September, for those two instalments. Also where the shortfall comes from capital gains, dividends, lottery-type winnings or first-time business income and the tax is paid in later instalments or by 31 March.
Do I pay section 424 interest if I paid 90% of my tax as advance tax?
No. Section 424 applies only where no advance tax was paid or the amount paid is less than 90% of the assessed tax.
Is advance tax payable if my tax is below ₹10,000?
No. Advance tax is payable only when the tax for the year, after TDS and TCS, is ₹10,000 or more.
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Official references
The statutory sources behind this page. We keep our guidance aligned to them: verify anything time-sensitive directly.
- Ministry of Corporate AffairsCompanies Act filings, forms and fee schedules
- Income Tax DepartmentReturns, forms, rates and e-filing utilities
- GST PortalRegistration, returns and rate notifications
Facts on this page are checked against these sources; the date of the last check is shown at the top of the page. It is general guidance, not advice on your specific facts. How we write and check our guides.