Three Distinct Interest Provisions, Three Different Triggers
Section 432 (successor to old Section 234A) charges interest at 1% per month or part thereof for delay in filing the income tax return beyond the statutory due date, computed on the tax amount remaining unpaid (assessed tax minus advance tax, TDS/TCS credit, and relief already given) — running from the day after the due date until the actual date of filing.
Section 433 (successor to old Section 234B) charges interest at 1% per month for a shortfall in advance tax paid during the year: if the advance tax actually paid is less than 90% of the assessed tax, interest runs from 1 April of the assessment year until the date of determination of total income (or actual payment, if earlier) on the shortfall amount.
Section 434 (successor to old Section 234C) charges interest at 1% per month for deferment of advance tax installments — even if the annual 90% threshold under Section 433 is met, failing to pay the correct proportion by each quarterly due date (15% by 15 June, 45% by 15 September, 75% by 15 December, 100% by 15 March) triggers a separate, shorter interest charge (typically 1 month per missed installment, 3 months for the December installment) on the shortfall for that specific quarter.
All three interest computations apply the standard simple-interest convention of 1% per month or part of a month (part-month rounded up), and are computed independently — a taxpayer can be liable under all three sections simultaneously for the same year if they both under-paid advance tax throughout the year and filed the return late.
Worked Example: Return Filed Late with Advance Tax Shortfall
Assessed tax for FY 2025-26 is ₹3,00,000. Advance tax paid was ₹1,50,000 (50% — well below the 90% threshold), and the return (due 31 July 2026) was actually filed on 20 October 2026.
Frequently Asked Questions (FAQs)
What is the interest rate under all three sections?
1% per month or part of a month (rounded up to a full month) in each case — Section 432 (late filing), Section 433 (advance tax shortfall below 90%), and Section 434 (deferment of quarterly advance tax installments).
Can interest apply under Section 432, 433, and 434 simultaneously?
Yes. They address different defaults — late filing, overall advance tax shortfall, and quarterly installment shortfall — and are computed independently, so a single taxpayer can owe interest under all three for the same assessment year.
What is the 90% threshold relevant to Section 433?
If a taxpayer's advance tax paid during the financial year is at least 90% of the final assessed tax, no Section 433 interest applies at all, regardless of exactly when the remaining 10% was paid. Falling short of the 90% mark triggers interest on the full shortfall from 1 April of the assessment year.
What are the quarterly advance tax due dates relevant to Section 434?
15% of assessed tax by 15 June, 45% (cumulative) by 15 September, 75% (cumulative) by 15 December, and 100% by 15 March of the financial year. Shortfall at any of these checkpoints (subject to a 12% tolerance for the first two installments before 2016 amendments; current practice generally applies the checkpoint strictly) triggers Section 434 interest for that quarter.
Does presumptive taxation (Section 44AD/44ADA equivalent) affect these interest provisions?
Taxpayers opting for presumptive taxation schemes are only required to pay their entire advance tax liability in a single installment by 15 March, so Section 434's quarterly checkpoints do not apply to them in the same way — but Section 432 and 433 interest for late filing and overall shortfall still apply if triggered.