Section 216 of the Income Tax Act, 1961: Interest for Underestimation of Advance Tax
Section 216 dealt with interest chargeable where an assessee underestimated advance tax or improperly deferred payment under the earlier advance-tax system. It is a historical provision, not the basis for charging interest on current advance-tax instalments.
What did Section 216 provide?
The provision empowered the Assessing Officer, on making a regular assessment, to direct payment of simple interest where the statutory conditions were satisfied. The officer had to identify an underestimation of advance tax affecting early instalments or a wrongful deferment of payment.
Clause (a): Underestimation of advance tax
Where an assessee underestimated advance tax under the then-applicable Sections 209A or 212, thereby reducing the amount payable in either of the first two instalments, interest could be directed for the period of deficiency. The comparison took account of the aggregate advance tax actually paid during the year.
Clause (b): Wrongful deferment
Where an assessee wrongly deferred advance tax on part of the income under the then-applicable Section 213, interest could be directed for the period of deferment.
Historical rate and computation
The version reproduced in the original page specified simple interest at 15% per annum, following an amendment effective 1 October 1984. That percentage is historical and should not be used to calculate interest under the modern advance-tax regime.
| Historical trigger | Period for interest |
|---|---|
| Underestimated first or second instalment | Period during which the instalment payment was deficient |
| Wrongfully deferred payment | Period for which advance tax was improperly deferred |
The Explanation deemed an instalment due before the expiry of six months from the beginning of the relevant previous year to have fallen due 15 days after the expiry of those six months, for the purpose of the section.
Current treatment of advance-tax shortfalls
For assessment years governed by the later regime under the Income-tax Act, 1961, Section 234B addressed interest for default in payment of advance tax and Section 234C addressed interest for deferment of advance-tax instalments. The applicable conditions, percentages, reliefs and assessment year must be checked independently; Section 216's historical 15% figure does not apply to those provisions.
For tax years governed by the Income-tax Act, 2025, consult the provisions on interest for default or deferment of advance tax in that Act and the relevant commencement, transition and savings provisions. Do not assume that a section number or rate from the 1961 Act carries over unchanged.
Official legal sources
- Income Tax Department - official legislation and guidance
- India Code - central legislation and amendments
- Income Tax e-Filing portal - taxpayer services
Historical text of Section 216 and amendment notes
The following transcription is retained from the original webpage for archival reference. It includes the original amendment footnotes; readers should consult the official legislation for authoritative wording and historical versions.
Read historical statutory text and amendment notes
Where, on making the regular assessment, the 1 Assessing Officer finds that any assessee has-
2 (a) under 3 section 209A or section 212 under-estimated the advance tax
payable by him and thereby reduced the amount payable in either of the first two
instalments; or
(b) under section 213 wrongly deferred the payment of advance tax on a part of
his income;
he may direct that the assessee shall pay simple interest at 4 fifteen per cent. per annum-
(i) in the case referred to in clause (a), for the period during which the payment was deficient, on the difference between the amount paid in each such instalment and the amount which should have been paid, having regard to the aggregate advance tax actually paid during the year; and
(ii) in the case referred to in clause (b), for the period during which the payment of advance tax was so deferred.
Explanation.-For the purposes of this section, any instalment due before the expiry of six months from the commencement of the previous year in respect of which it is to be paid shall be deemed to have become due fifteen days after the expiry of the said six months.
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1. Subs. by Act 4 of 1988, s. 2, for "Income-tax
officer" (w.e.f. 1-4-1988).
2. Subs. by Act 14 of 1969, s. 19, for clause (a) (w.e.f. 1-4-1970).
3. Subs. by Act 19 of 1978, s. 28, for "sub-section (1) or sub-section (2) or
sub-section (3) or sub-section (3A) of section 212" (w.e.f. 1-6-1978).
4. Subs. by Act 67 of 1984, s. 24, for "twelve per cent." (w.e.f. 1-10-1984).
Earlier the quoted words were substituted by Act 16 of 1972, s. 25 for "nine per
cent." (w.e.f. 1-4-1972).
Frequently asked questions
Is Section 216 applicable to current advance-tax payments?
No. The historical Section 216 regime ceased to apply from assessment year 1989-90. Current liabilities must be determined under the legislation applicable to the relevant tax year.
Does the 15% rate in Section 216 still apply?
No. The rate shown belongs to an older statutory provision and must not be confused with the interest rates under the applicable newer law.