Interest on advance-tax shortfall.
Estimated 234B interest
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Shortfall
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Your breakdown
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Two penalties hiding behind one phrase
When people say "234 interest" they usually mean two separate charges that get clubbed together on the same challan. Section 234B is the penalty for not paying enough advance tax across the year. Section 234C is the penalty for missing the quarterly rhythm. Both run at 1% per month, both are simple interest, and both bite only once your tax after TDS crosses ₹10,000. The calculator above focuses on the 234B piece, which is usually the larger of the two, and is the one most people forget to provision for.
When 234B switches on: the 90% line
Section 234B is binary. If the advance tax plus TDS you paid by 31 March is at least 90% of your assessed tax, there is zero 234B interest. Pay even one rupee less than that 90% threshold and the interest applies on the entire shortfall, not just the bit below 90%. That cliff edge is why the calculator gates on this test before charging anything. The interest then accrues at 1% for every month (or part of a month) from 1 April until the date you finally pay the balance as self-assessment tax.
Worked example: a ₹80,000 shortfall paid four months late
Your assessed tax is ₹2,00,000. Through the year you paid ₹1,20,000 as advance tax and TDS combined. The 90% line sits at ₹1,80,000, so you are below it and 234B applies. You file and pay the balance in July, four months after the year ended.
The bars below show how the ₹3,200 grows by ₹800 each month it stays unpaid.
How 234C differs, and why it can stack on top
234C does not care about your year-end total. It checks each instalment date. If you paid less than 15% by 15 June, less than 45% by 15 September, less than 75% by 15 December, or less than 100% by 15 March, it charges 1% per month on each shortfall for the relevant period. The 234C charge is computed separately and added to the 234B figure on your final challan. So a taxpayer who paid nothing all year and then cleared the dues in July effectively pays 234C for the deferred instalments plus 234B from April to July. The calculator here isolates 234B so you can size that component cleanly; treat 234C as an extra layer for any quarter you missed.
The safe-harbour wrinkle inside 234C
234C has a built-in tolerance. As long as you have paid at least 12% of the tax by 15 June and 36% by 15 September, the small slip below the 15% and 45% targets is forgiven for those two dates. This exists because nobody can estimate June income perfectly. There is no such tolerance for 234B; the 90% test is hard. My advice: if you realise in March that you are short, pay immediately rather than waiting for the return, because every extra month is another full percent on the whole shortfall.
Who actually gets caught by this
In my experience the typical 234B victim is not a careless taxpayer; it is a salaried person who had a one-off windfall. Your employer deducts TDS perfectly on salary, so you assume your tax is covered. Then you sell mutual fund units or a property in February, book a large capital gain, and the TDS on salary never touched it. Suddenly your assessed tax leaps past the 90% line and you are short on advance tax you never realised you owed. Rental income, a fat dividend year, and freelance receipts on the side do the same thing. The fix is simple but easy to forget: every time a large non-salary income event happens, recompute your full-year tax and top up your advance tax in the very next instalment. Interest income is the quiet one, because banks deduct TDS at only 10% while you might be in the 30% slab, leaving a 20-point gap that quietly builds into a shortfall by year-end.
Is this interest deductible or refundable?
Neither. Interest under 234B and 234C is a cost of non-compliance. You cannot claim it as a deduction against income, and it is never refunded. The only way to reduce it is to pay your advance tax correctly and on time.
Does a part of a month count as a full month?
Yes. For both sections, any fraction of a month is rounded up to a whole month. Paying on 2 July rather than 30 June can add a full extra month of interest, so it genuinely pays to clear the dues a day or two before a month rolls over.