TaxSaral
Section 424Interest & Penaltieswas Section 234B in IT Act 1961

Interest for Default in Advance Tax

If you paid less than 90% of your assessed tax as advance tax, interest at 1% per month is charged from April 1 of the assessment year to the date of actual payment.

Who this applies to

Taxpayers who underpaid advance tax — paid less than 90% of their total assessed tax liability.

Key Points

  • 90% threshold: if your total advance tax paid is less than 90% of the total tax, Section 424 kicks in.
  • Interest is calculated on the shortfall (assessed tax minus advance tax paid) from April 1 of the AY to the date you pay.
  • Even if you pay all four advance tax instalments, you may face Section 424 interest if total was under 90%.
  • TDS deducted by employer counts as advance tax — if TDS covers 90%+, you may be safe.

Worked Example

1

Investor who underestimated capital gains

Scenario

Leena estimated her tax at ₹80,000 and paid ₹72,000 as advance tax by March 15, 2027. After final computation, her assessed tax is ₹1,20,000 (she had unexpected capital gains). She pays the balance ₹48,000 on June 30, 2027.

Calculation

Assessed tax:               ₹1,20,000
Advance tax paid:           ₹72,000 (60%)
90% threshold:             ₹1,08,000

Since 60% < 90%, Section 424 applies.
Shortfall (assessed tax – advance tax): ₹1,20,000 – ₹72,000 = ₹48,000

Period: April 1, 2027 to June 30, 2027 = 3 months
Interest: ₹48,000 × 1% × 3 = ₹1,440

Result

Leena pays ₹1,440 in Section 424 interest in addition to the ₹48,000 tax shortfall. Had she paid ₹1,08,000 (90%) as advance tax, she would have owed only Section 234B interest on the remaining 10% from April 1, not on the full gap.

Related Sections

Section 423Interest for Late Filing of Return
Section 425Interest for Deferment of Advance Tax Instalment
Sections 403–408Advance Tax — Obligation and Instalments

Still have questions about Section 424?

Our tax team can explain how this provision applies to your specific situation.

Ask our tax teamBrowse all sections

Section references are based on the Income Tax Act 2025 (Tax Year 2026-27). Examples are illustrative — verify with a Chartered Accountant before filing.