TaxSaral

Section 424 · was Section 234B in the 1961 Act

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 it 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

Investor who underestimated capital gains

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.

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

Not sure how Section 424 applies to you? Ask a question or browse 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.