The second advance tax instalment for FY 2026-27 falls due on 15 September 2026. By that date you are expected to have paid 45% of the year's advance tax — cumulatively, so it includes whatever should have gone in by 15 June.
That much is on every tax site in India. What is not is the shape of the penalty, which is strange enough to be worth five minutes of your time. For almost its entire range, section 234C is a reasonable, boring 12% a year. At exactly one point it turns into something else.
The short version: pay at least 36% of your advance tax by 15 September and section 234C charges you nothing on that instalment, even though the schedule asks for 45%. Fall a rupee below 36% and interest is charged on the shortfall from 45% — not from 36%. The relief does not taper. It switches off.
Where the money actually is
Take a ₹4,00,000 advance tax liability, which is roughly what someone with ₹25–30 lakh of income and modest TDS coverage is looking at. The September instalment asks for ₹1,80,000, and the trigger sits at ₹1,44,000.
Pay ₹1,44,000 and you owe nothing. Pay ₹1,43,900 and the shortfall is measured against the full ₹1,80,000, giving a base of ₹36,100 and three months of interest at 1% — ₹1,083. That last ₹100 is the most expensive hundred rupees in the Indian tax code.
The chart
Interest falls steadily as you pay more, exactly as you would expect — and then does something no interest charge should do.
Section 234C interest on the 15 September instalment alone, for a ₹4,00,000 advance tax liability. The shaded band between 36% and 45% is the tolerance: pay anywhere in it and nothing is charged, despite being short of the schedule.
It scales with the liability, not with the miss
The jump is worth 0.27% of your whole advance tax liability — the nine percentage points between the trigger and the requirement, times 1% a month, times three months. It is the same jump whether you missed narrowly or badly, and it dwarfs the size of the miss itself: on that ₹4,00,000 liability, being ₹100 short costs ₹1,083 and being ₹10,000 short costs ₹1,380. The extra ₹9,900 of shortfall adds ₹297. Almost the entire cost is the discontinuity, not the gap.
What does move it is the size of the liability, because the jump is a share of that:
| Advance tax liability | 36% trigger | Paid ₹100 below it | Cost of that ₹100 |
|---|---|---|---|
| ₹2,00,000 | ₹72,000 | ₹71,900 | ₹543 |
| ₹4,00,000 | ₹1,44,000 | ₹1,43,900 | ₹1,083 |
| ₹6,00,000 | ₹2,16,000 | ₹2,15,900 | ₹1,623 |
| ₹10,00,000 | ₹3,60,000 | ₹3,59,900 | ₹2,703 |
| ₹20,00,000 | ₹7,20,000 | ₹7,19,900 | ₹5,403 |
| ₹50,00,000 | ₹18,00,000 | ₹17,99,900 | ₹13,503 |
The June instalment has the same structure with smaller numbers: a 12% trigger against a 15% requirement, so the cliff there is worth 0.09% of the liability. December and March have no tolerance band at all — the requirement is the trigger, and interest starts from the first rupee short.
Everywhere else, the interest is genuinely reasonable
It is worth saying plainly, because tax-deadline coverage tends towards alarm. 1% a month simple, for three months, is 12% a year. That is cheaper than a personal loan, considerably cheaper than a credit card, and it is not compounded.
Defer ₹60,000 of the June instalment for three months and it costs ₹1,800. If that ₹60,000 was doing something that returned more than 12% annualised, deferring was rational. Advance tax is not a penalty regime; it is a financing charge, and a mild one.
Which is exactly why the cliff is worth knowing about. It is the one place where the rate stops describing the cost. Paying ₹100 less to get ₹1,083 of interest is not a 12% financing decision — it is a 1,083% one, on that hundred rupees. Nothing about the design of the section tells you this is coming.
The one thing to check before 15 September: not whether you have paid 45%, but whether you have cleared 36%. If you are near the line, the cheapest possible action is to push yourself over it. If you are far below, the trigger is unreachable and the ordinary arithmetic applies — pay what you can, because interest runs on whatever is still short.
Missing June is already priced in
A common hope in early September is that catching up now undoes the June miss. It does not. Each instalment is assessed as at its own date, and 15 June has passed.
On that ₹4,00,000 liability, skipping June entirely and then paying the full 45% by 15 September still costs ₹1,800 in section 234C — the June shortfall of ₹60,000, charged for three months. Paying June on time and the same amounts thereafter costs nothing. The ₹1,800 is fixed and there is no longer any action that removes it.
What you can still change is September. And because the instalments are cumulative, a June miss makes the September trigger harder to clear, not easier — the 36% is measured against everything paid to date, so the gap you left in June is still sitting there in the calculation.
Who this applies to
Advance tax is payable where your liability for the year, after TDS and TCS, is ₹10,000 or more (section 208). Below that, nothing. A resident aged 60 or above with no business or professional income is outside the whole regime under section 207 — no instalments, no 234B, no 234C, however the year turns out.
Salaried employees usually escape by accident, because TDS on salary covers the liability. What pulls them back in is income the employer cannot see: rent, interest above the TDS threshold, capital gains, dividends, or freelance work on the side. If you have had a good year in the market, you are quite likely in scope for the first time and unaware of it.
Two exits are worth knowing. Presumptive filers under section 44AD or 44ADA may pay the entire amount in one instalment by 15 March — no September obligation and no cliff, which is one of the quietly valuable features of those schemes. And the section 234C proviso excludes shortfall traced to capital gains, lottery winnings, dividend income, or business income arising for the first time, provided the tax on it goes in with the next instalment or by 31 March. That covers what you could not have foreseen, not what you preferred not to estimate — and it is relief from 234C only. Section 234B still charges 1% a month on the total shortfall from 1 April 2027 until you pay.
What to do in the next five weeks
- Estimate the year's tax first, not the instalment. Every percentage in section 234C is a share of the annual figure, so an estimate that is wrong makes every instalment wrong. The regime choice moves it materially — settle that before the arithmetic.
- Subtract TDS and TCS before applying any percentage. The instalments are shares of what remains, not of your total tax. This is the single most common source of overpayment.
- Find your 36% number and clear it. Not 45% — 36%. If you can only reach one of the two figures, that is the one worth reaching.
- Pay on or before the 15th, not on the 16th. Interest accrues per month or part of a month, so a day late costs a full month on the whole shortfall.
- If a capital gain arrived after 15 June, note it. The proviso may take the resulting shortfall out of 234C altogether, but only if the tax goes in with this instalment.