Advance Tax Instalments: Avoiding Interest Under Sections 234B & 234C

Advance tax requires taxpayers with estimated annual liability above ₹10,000 to pay tax in instalments throughout the year rather than as a lump sum at year-end. Failing to pay on time — or underpaying — triggers interest under Sections 234B and 234C, which compound and can constitute a meaningful addition to your final tax bill.

The Four Instalment Deadlines

• On or before June 15: at least 15% of estimated annual tax liability
• On or before September 15: at least 45% cumulative
• On or before December 15: at least 75% cumulative
• On or before March 15: 100% of estimated annual tax liability

How Interest Is Calculated

Section 234C charges 1% simple interest per month (or part thereof) on the shortfall in each instalment. Section 234B charges 1% per month on unpaid tax if the aggregate advance tax paid is less than 90% of assessed tax. Both sections apply simultaneously — businesses that significantly underestimate annual income often face both charges stacked together at the time of assessment.

Estimation Tips for FY 2026–27

Use your P&L from the previous year as a starting point, then adjust for known changes: new contracts, maturing investments, property sale proceeds, or exceptional one-time income. For businesses with volatile income, consider the safe-harbour approach — paying advance tax equal to 100% of the previous year's assessed tax eliminates Section 234C exposure even if current-year income is higher. Accountrix can prepare your advance tax estimation and set up instalment reminders as part of our annual retainer service.