Sections 214 and 215 of the Income-tax Act, 1961: Interest Payable by Government and Assessee
Sections 214 and 215 are historical advance-tax interest provisions in Chapter XVII of the Income-tax Act, 1961. They remain relevant for understanding older assessments, but the Act expressly provides that Sections 214, 215, 216 and 217 do not apply to assessment year 1989-90 or any subsequent assessment year.
Section 214: Interest Payable by Government
Section 214 historically required the Central Government to pay simple interest where qualifying advance-tax instalments paid for a financial year exceeded the assessed tax. The provision prescribed the period for which interest was payable and contained rules for adjustment where later statutory orders increased or reduced the amount on which interest had been calculated.
For the historical operation of Section 214, "assessed tax" takes its meaning from Section 215(5). Section 214 also treated a first assessment made under Section 147 as a regular assessment for its purposes.
Section 215: Interest Payable by Assessee
Section 215 historically imposed simple interest where an assessee paid advance tax on the basis of an estimate or revised estimate and the advance tax paid was below the statutory proportion of assessed tax. The section also dealt with tax paid before completion of regular assessment, later variation of interest following specified orders, reduction or waiver in prescribed circumstances, and the meaning of "assessed tax".
Section 215(5) defined "assessed tax" for the purposes of that section and certain connected provisions. Section 215(6) treated a first assessment under Section 147 as a regular assessment for specified purposes.
What Law Applies Now?
For periods governed by the Income-tax Act, 1961 after the statutory cutoff, the principal provisions for interest on advance-tax shortfall or deferment are Section 234B and Section 234C. Section 234B addresses default in payment of advance tax, while Section 234C addresses deferment of advance-tax instalments.
The Income Tax Department has clarified the transition to the Income-tax Act, 2025. A default connected with advance tax for financial year 2025-26 remains governed by the Income-tax Act, 1961, including Sections 234B and 234C. Advance-tax liability for income earned in financial year 2026-27 arises under the Income-tax Act, 2025; the corresponding provisions identified by the Department are Sections 424 and 425.
Practical Meaning
- Use Sections 214 and 215 when examining their historical application to assessment years before AY 1989-90.
- Do not apply the historical 15 percent annual interest provisions of Sections 214 and 215 to modern assessments.
- For a later assessment governed by the 1961 Act, examine Sections 234B and 234C and other applicable refund or interest provisions according to the facts.
- For tax year 2026-27 onward, check the corresponding provisions of the Income-tax Act, 2025 and the applicable rules, forms and official guidance.