Buy a Life Insurance Plan in a few clicks

Now you can buy life insurance plan online.

Kotak e-Term

Protect Your family’s financial future with Kotak e-Term. Know more

Kotak Assured Savings Plan

A plan that offer guaranteed returns and financial protection for your family. Know more

Kotak Guaranteed Savings Plan

A plan that offers long term savings and insurance in one premium. Know more

Kotak e-Invest

Insurance and investment in one plan with Kotak e-Invest. Know more

Kotak Lifetime Income Plan

Retirement years are the golden years of life. Know more


Get a Call

Enter your contact details below and we will get in touch with you at the earliest.

  • Select your Query

Thank you

Our representative will get in touch with you at the earliest.

Interest Imposed Under Sections 234A, 234B and 234C

Learn how to calculate the penalty interest on your outstanding tax amount based on Section 234 of the Income Tax Act. Know the various interests under Section 234A, 234B & 234C.

  • Mar 26, 2021

You need careful planning to pay your taxes and file your returns on time. You must pay hefty fines if you fail to comply with the tax rules and miss the due dates for tax payment and filing. The penalties are calculated as interest on your outstanding tax amount based on Section 234 of the Income Tax Act, 1961.

If you have forgotten to pay or file taxes within the due dates, you need to learn how to calculate the penalty interest. But first, you need to know the various interests under Section 234.

Types of interest imposed under Section 234

Section 234A – for defaults in filing Income Tax Return (ITR) 2.

Section 234B – for delays in advance tax payments or incomplete payment

Section 234C – for deferred advance tax payments

Section 234A income tax act

Each year, the tax authorities prescribe a time limit within which you must file your ITR, usually July 31. If you file after this date and have outstanding taxes, you will incur a penalty under Section 234A. In addition, you will have to pay an interest of 1% or part of the month on the unpaid tax amount. The interest will be levied for the period from the due date for filing your return until the date when you file it.

Interest Rates Under Section 234A

Incentives are assessed under section 234A for late filing of an income tax return. On the unpaid tax balance, interest is charged at a rate of 1% per month or a fraction thereof. Simple interest is the type of interest that must be paid. For each month or fraction of a month that your tax return is late, the taxpayer is responsible for paying a simple interest charge of 1%.

Duration of Interest Levy

Interest under Section 234A accrues beginning on the day after the income tax return is due and ends on the day the return of income is furnished. When a return has not been provided, interest accrues until the day the assessment under Section 144 is finished.

For example, you fail to file the tax return and have to pay ₹1,00,000 as tax. You pay and submit your ITR after three months from the stipulated date. The 1% simple interest for those three months on the due amount of ₹1,00,000 will be

1,00,000 X 3% = ₹3,000

Hence, you will have to pay ₹1,03,000.

234B of income tax act

This section restricts the penalty imposed in case of delays in paying advance tax.

What is advance tax?

Advance tax involves paying your payable tax amount in quarterly instalments on due dates defined by the income tax department. If your tax liability in a financial year amounts to ₹10,000 or more, you must pay advance tax.

Taxpayers who need to pay advance tax include business owners, salaried employees, and self-employed professionals. However, taxpayers opting for tax calculation on income from businesses having 8% turnover on a presumptive basis are exempt from paying advance tax.

Interest Rates Under Section 234B

Section 234B imposes interest of 1% per month or fraction thereof for failure to pay advance tax. Simple interest is the nature of interest. To put it another way, the taxpayer is responsible for paying simple interest at a rate of 1% per month or fraction thereof for failure to pay advance tax.

Interest applicable under Section 234B

Interest under this section applies if:

Your payable tax amount after paying TDS exceeds ₹10,000, but you did not pay any advance tax. The advance tax you paid is less than 90% of your ‘assessed tax’.

In either of these cases, you have to pay 1% interest on your assessed tax amount, rounded off to the nearest hundred, less the advance tax you already paid.

For example, suppose your total tax liability for the current financial year amounts to ₹2,00,000 after all deductions and exemptions.

Scenario A - TDS of ₹1,20,000 got deducted from this sum:

Your assessed tax is ₹(2,00,000 –1,20,000) = ₹80,000.

Hence, you had to pay at least 90% of this balance amount of ₹80,000 as advance tax, which equals ₹72,000.

But you paid only ₹50,000 within the last payment date and the remaining ₹30,000 five months after the deadline.

Therefore, as per Section 234B, you must pay penalty interest on your assessed tax amount of ₹80,000 minus the ₹50,000 advance tax you paid.

Hence, your penalty equals to ₹(80,000 – 50,000) X 1% X 5 = ₹1,500.

Scenario B - You paid no advance tax at all:

Your penalty would be ₹80,000 X1% X 5 = ₹4,000.

Scenario C - No TDS has been deducted, and you failed to pay any advance tax as well:

You will have to pay ₹2,00,000 X 1% X 5 = ₹10,000.

Scenario D - Your income was not subject to TDS:

Therefore, your payable tax is ₹2,00,000.

90% of this amount is ₹1,80,000. Therefore, the advance tax you paid, ₹50,000, is less than this sum.

Therefore, the 1% interest applies to ₹2,00,000 (assessed total tax) – ₹50,000 (advance tax paid) = ₹1,50,000.

Hence, in this case, the penalty = ₹1,50,000 X 1% X 5 = ₹7,500.

Duration of Interest Levy

Interest under section 234B is assessed beginning on the first day of the assessment year (often on April 1) and continuing until the date on which section 143(1) income is determined or until a regular assessment is conducted. Interest is charged on the differential amount from the first day of the assessment year until the date of assessment or re-computation in the event that the income is increased as a result of the assessment or re-computation.

Section 234C

The tax authorities try to relax the income tax burden through various tax reliefs and facilities. One such facility is the convenience of paying advance tax in four instalments spread over the financial year. However, if you default, you will have to pay penalty interest on the deferred payment under Section 234C.

Interest Rates Under Section 234C

Interest is assessed under section 234C at 1% per month or a fraction of a month for failure to pay advance tax instalments on time. If an individual’s advance tax instalments are not paid in full or are paid late, the taxpayer is responsible for paying simple interest at a rate of 1% per month or a fraction thereof.

Duration of Interest Levy

If the final instalment is not paid in full, interest under section 234C is assessed for a month, and if the first, second, and third instalments are not paid in full, interest is assessed for three months.

The tax department has assigned the following schedule for the payment of advance tax:

Due Date

Advance tax payable for all taxpayers other than assesses opting for presumptive income under Section 44AD

Advance tax payable for taxpayers opting for the presumptive income scheme under Section 44AD

June 15

Up to 15% of the total amount payable


September 15

Up to 45% of the total amount payable


December 15

Up to 75% of the total amount payable


March 15

Up to 100% of the total amount owed

100% advance tax payable

The situations for which Section 234C applies include:

The advance tax paid within June 15 is less than 12% of the assessed tax. The advance tax paid within September 15 is less than 36% of the assessed tax. The advance tax paid within December 15 is less than 75% of the assessed tax. The advance tax paid within March 15 is less than 100% of the assessed tax.

If you default, the penalty interest you have to pay is set at 1% of the outstanding advance tax amount. The interest is calculated from the respective cut-off dates for every financial quarter up to the date you pay the due amount.

Interest calculation under Section 234C for taxpayers not opting for the Section 44AD presumptive income scheme:

Outstanding Amount

Rate of interest chargeable per month (Simple Interest)

Period of Interest

Amount on which interest is levied

Less than 15% of the total advance tax due paid on or before June 15


3 months

15% of the total advance tax–actual amount deposited within June 15

Less than 45% of the total advance tax due paid on or before September 15


3 months

45% of the total advance tax–actual amount deposited within September 15

Less than 75% of the total advance tax due paid on or before December 15


3 months

75% of the total advance tax–actual amount deposited within December 15

Less than 100% of the total advance tax due paid on or before March 15 /td>


100% of the total advance tax–actual amount deposited within March 15

For example, suppose you need to pay ₹2,00,000 in total as advance tax. It is payable in four instalments, as described in the table above. But you pay only part of the actual amounts due per instalment. Then, the penalty charged will be as follows:
Therefore, the total interest payable is ₹5,200.

Payment due date

Advance tax payable

Actual tax paid

Deficit (Cumulative)

Penalty applicable (Cumulative)

June 15




@1% X 3 X 20,000 = 600

September 15




@1% X 3 X 40,000=1,200

December 15




@1% X 3 X 80,000=2,400

March 15




1% X 1 X 1,00,000=1,000

However, you need not pay any penalty if any deficit crops up due to an incorrect estimation of capital gains or speculative income from the lottery, gambling, etc.

How to avoid penalty payments?

Timely tax payments and return filing are the only ways to avoid such fines. However, sometimes, arranging for the lump-sum tax amount can be challenging. In such cases, tax defaults and deficits might occur.

One way out of such predicaments is to lower your tax burden by entirely using the available tax deductions. Section 80C offers the maximum tax break on investing in specific tax-deductible financial instruments, such as life insurance.

You can claim deductions up to ₹1.5 lakhs for the premiums paid towards your life insurance policy every financial year. However, tax savings should not be the only reason for buying life insurance. You must select a plan that aligns with your investment targets and long-term financial goals.

Kotak Life offers a wide range of life insurance plans catering to various investment and insurance needs, such as:

Savings for the future wealth creation to fund life goals creating retirement funds for financial freedom in advanced funding children’s higher education income replacement to safeguard loved ones against financial shortfalls in case of an unfortunate event.

You can study the features of the different policies online and get instant quotes on the premiums payable. Moreover, it helps you plan your tax payments as well. Hence, choosing a plan that meets your savings, insurance, and tax-planning needs is advisable and investing as soon as possible.

Download Brochure


  • Increasing Life Cover*
  • Guaranteed^ Maturity Benefits
  • Enhanced Protection Through Riders
  • Tax Benefits
  • Dual Benefits: Guaranteed^Maturity + Death benefits

Ref. No. KLI/22-23/E-BB/999


Download Brochure


  • Enhanced Protection Through Riders
  • Life Cover
  • Tax Savings
  • Multiple Premium Payment Terms
  • Guaranteed @ Loyalty Addion
  • Accrued Guaranteed @ Additions

Ref. No. KLI/22-23/E-BB/490


- A Consumer Education Initiative series by Kotak Life

Similar Articles

How can I get Form 16B from traces?

What is TDS Refund Process?

8 Things to Help You Select a Savings Investment plan

Highlights of the Union Budget 2023-24

धारा 80डी आयकर अधिनियम, 1961

What is better - Guaranteed Savings Plan or Fixed Deposit?

How to save tax for salaried person?

How To Save Tax Better with 80C

Are Financial Planning and Tax Planning the Same Thing?

Budget 2019: Impact on the Common Man in India

How to e file ITR on Income Tax Government Portal

Presumptive Taxation for Business and Profession

TDS rules on the sale of jointly owned property

Tax Planning and Tax Benefits of Life Insurance

Top 8 Tax-Saving Methods in India- Budget Planning

Tax Saving for Self Employed in India

Section 16 of the Income Tax Act (ITA), 1961

Financial Benefits and Government Schemes Every Woman in India Should Know

A Complete Guide for Filing ITR 3 Form

A Comprehensive Guide to Understand the ITR 7 Form

Income Tax Deductions & Exemptions under Sections 80C, 80D & 80DDB for FY 2021-22 & 2022-23

How to create a savings plan and make good investment choices

How to Check Income Tax Refund Status Online in India

इनकम टैक्स रिटर्न कैसे फाइल करें?

How to Check Income Tax Returns Status Onine?

How to View 26AS and Download Form 26AS Online

Types of Income Tax Return (ITR) Forms

How Inflation Affects Savings and Investment?

How to File Form 10E for Tax Relief on Salary Arrears?

Post Office Savings Scheme - All You Need to Know

Income Tax Deductions for Disabled Persons Under Section 80U

Saving Plans to Give Children a Debt-free College Education

What is the Difference between Assessment Year (AY) and Financial Year (FY)?

Best Savings plan for the middle class in India

Difference Between Guaranteed Savings Plan and Guaranteed Income Plan

How To Invest In Guaranteed Return Plans For Higher Returns And Financial Security?

Personal Finance - How to Deal with Emergencies When Preparing Finances

Tax Benefits of ULIP Plans Available for NRIs

How Should I Allocate A Monthly Savings Plan For Long-Term Benefits?

What are Direct Taxes? How to Avoid being Overtaxed?

How to Boost Your Savings with Guaranteed Results

How can NRIs prevent double taxation in India?

What is an Endowment Plan?

Section 80D - Medical and Health Insurance Tax Benefits Under Section 80D

What is capital gains tax, and how it works?

ITR 2 Form – Complete Guide

Section 44AD of Income Tax Act for AY 2021-22

Tax Deductions You MUST Know

What is the Last ITR Filing Date and Penalty for Late Filing of ITR?

Tax-Savings Investments and Options in India

Financial Planning and Best investment options for Housewives

What is Form 16A?

How to Calculate returns on an assured savings plan?

Tax Saving Options for Salaried Employees

12 Tax Changes in Budget 2022 that May Impact Your Personal Financial Planning

How to Save Income Tax with Insurance

What is TDS Slab?

How to Download Form 16?

Saving Income tax in 2017 - 18

What is indirect tax and its types?

How to Pay Advance Tax Online in India

How to Check Income Tax Refund Status Online in India

What is Section 80C - Explained in Detail

What is Form 16B?

Tips to plan your savings in 2022

What is the TDS Rate on Salary?

स्रोत पर कर कटौती (टीडीएस) क्या है?

Tax Exemption and Scope of Coverage

What is Tax Deduction at Source (TDS)?

sections Under Section 80C of the Income Tax Act, 1961

What is ITR & How to File Income Tax Return?

Importance of Savings Plan You Need to Know

Why is Form 16 Important?

Maximize Your Savings: Tax Tips for Salaries Above ₹20 Lakhs

Income Tax Filing For NRI in India

Tax Saving Guide for 2019-20

All about TDS on Salary under Section 192 – Kotak Life

What is Form 26AS - All You Need To Know

How much gold can you keep at home? Limits and income tax rules explained

Income Tax Filing Using Multiple Form 16

Difference between Section 80C, 80CCC, 80CCD & 80D

Difference Between Gross Income & Total Income in Calculating Income Tax

Investing Lump Sum Amount

How to View 26AS and Download Form 26AS Online?

Plan your Daughter's Wedding With Best Monthly Savings Plan

What is the Difference Direct Tax and Indirect Tax

प्रत्यक्ष कर और अप्रत्यक्ष कर में क्या अंतर है?

Understand ITR4 Form: How to Fill, Structure & Determine Your Eligibility

Types of Riders in Insurance Policy

Everything You Need to Know About Tax Benefits of National Pension Scheme (NPS)

E-Filing of Income Tax Returns in India

What are Deferred Savings Plans?

Easy ways to make personal savings plans

आयकर स्लैब 2021-2022

Should you prefer a Guaranteed Savings plan over monthly income schemes?

Save Income Tax by 31st March: Here Is a Checklist

What is Salary Protection Insurance and Why You Need It

All You Need to Know About Section 80C

Income Tax Benefits for Doctors

Tax Season is Coming- Know How to Save Tax

How to Get Form 16?

How to File ITR Online

हाउस रेंट अलाउंस क्या है और इसके छूट की गणना कैसे की जाती है?

Income Tax Exemption for Physically Handicapped Dependent

How to File Income Tax Return - Everything You Need to Know

9 Unusual Investments you Didn't Know for Saving Taxes in India

A Guide to Life Insurance Policy’s Tax Benefits and Taxability

List of Important Income Tax FAQs

How Do Assured Savings Plans Work and Why You Should Consider One?

What is the Percentage of Tax Deducted at Source (TDS)?

Income Tax Deductions Under Section 80C

आयकर रिटर्न (आईटीआर) फॉर्म के प्रकार

Invest in Tax-Free Bonds: Understanding the Benefits and Who can Invest?

Union Budget 2023: Impact on Life Insurance

सुकन्या समृद्धि योजना (SSY) के कर लाभ क्या हैं?

Problems People Face with Tax Returns after a Job Change

What is Tax Evasion, and What are the Penalties for Tax Evasion in India?

3 Tips to Buy Guaranteed Savings Plan

ITR-6: Guide to filing ITR-6 Form online

Is PF Withdrawal Taxable for NRI?

Section 80C Deductions as per Income Tax Act, 1961

What is EEE in income tax? 5 tax-free investment options to become crorepat

Guide for Tax Calculation on your Salary

Money Saving Tips for Single Women

Tax Structure in India

Do Beneficiaries Pay Taxes on Life Insurance?

Difference between Section 80C and 80CCC of the Income Tax Act, 1961

Section 10 (10d) of Income Tax Act, 1961 on Payouts of Life Insurance Policy

What is Section 195 of the Income Tax Act? TDS on Non-Residents of India

Things to Do After Filing Income Tax Returns

Income Tax Calculator: How Life Insurance Policies are Taxed? Explained

Have You Considered Term Insurance a Part of Your Tax Planning?

What is the difference between TDS and TCS?

Received an Income Tax Notice? Your Guide to Understanding Intimations under Section 143 (1)

Investment Proofs You Need Submit To Lower TDS Cut From Your Salary

Why PAN Card is Essential for Income Tax Filing?

Tax Saving Tips: Best Ways to Save Income Tax for 2021

Personal Finance - Meaning, Importance, and Tips for Personal Finance

Tax Rate Chart for FY 2022-2023: What is TDS Slab?

भारत में महिलाओं के लिए सरकारी योजना

ITR 1: Sahaj Form

Basics of Guaranteed Savings Plan

Union Budget 2023 and Tax Exemptions on Life Insurance Premium Over ₹5 Lakhs

How to Claim a Tax Refund?

How to create wealth through a savings plan?

How to File TDS Return?

All you need to know About Tax on Inheritance

Challan 280 - How to Use Challan 280 to Pay Income Tax

How to File Income Tax Return without Form 16

Income Tax Effects on Salary Deductions in the Union Budget 2023

What To Do If Your TDS Is Not Deposited With The Government?

Insurance and Endowment: Everything You Need to Know!

Section 80G of the Income Tax Act

Income Tax Exemption for Disabled

How to file Form 16 online?

What Investment Options Come with Tax Incentives?

Income Tax Deduction Under Section 80CCC In India

When Should TDS be Deducted and Who is Liable to Deduct it?

Guaranteed Return Plans-Why is it a must for you?

LTC Cash Voucher Scheme October 2020 – Everything You Need to Know

5 Popular Tax-Saving Schemes in India

TDS Due Dates of FY 2022-23 For Return Filing

How to File Income Tax Return for First Time Tax Payers

What is Section 80CCC of the Income Tax Act 1961

What is Section 80C Deduction?

What is Section 10D of the Income Tax Act?

What is a savings plan?

9 Income Tax Myths That Could Cost You Money while Filing returns

प्रधानमंत्री सुरक्षा बीमा योजना

Income Tax Slabs and Rates in India for FY 2021-22/AY 2022-23

What is Section 80C Deduction Limit?

All You Need To Know About Assured Savings Plan

Tax Saving Options other than Section 80C

Key Changes of the Union Budget 2023 You Must Know

Impact of GST on Life Insurance in India

What are the Different Types of Taxes in India?

Complete Savings Plan for Low Income Earners

Form 16, Form 16A, and Form 16B?

What is HRA (House Rent Allowance) and How is HRA Exemption Calculated?

52 Weeks Savings Plan: Daily Savings Plans for a Better Tomorrow

How to Save Tax on Salary Arrears?

Difference Between Guaranteed and Assured Returns

What is TDS Exemption Limit?

Should one prefer a guaranteed savings plan over monthly income schemes?

How to File Form 16 for Salaried Employees?

What is Rule 132 of Income Tax? How Does it Affect You?

Tax-Free Income in India

Who Should Invest In Savings Plan

Tax Benefit of Investing in Term Plan

What is the Maximum Maturity Benefit in Assured Savings Plans?

Why Tax Planning Should Be an All-year Round Activity

What is the Difference between Form 16 and Form 16A?

What Is Advance Tax and How Is It Calculated?

How To Save Tax Using Life Insurance?

Tax Planning Tips for a Newly Married Couple

How to E-Verify ITR: A Step-by-Step Guide to Electronically Verify your Income Tax Return

What is TDS (Tax Collected at Source)? A comprehensive guide

How Much Money This Budget 2019 Can Help You Save

All about TDS Payment Online & Due Dates

Understanding Tax Exemptions in ULIP (Old and New)

Penalty For Late Filing TDS Return

धारा 80सी आयकर अधिनियम, 1961

Home Investment Plan to Buy Dream Home

Tax Benefits for Startups in India

Section 80E: Tax Exemption on Interest on Education Loan

Why January Is an Important Month for Saving Tax?

What is ITR 5 Form and How to File ITR 5?