CHAPTER XVII - COLLECTION AND RECOVERY OF TAX - C.-ADVANCE PAYMENT OF TAX
CHAPTER XVII - COLLECTION AND RECOVERY OF TAX - C.-ADVANCE PAYMENT OF TAX
Section 216 - Interest Payable by Assessee in Case of Under-estimate, etc.
Case Laws & Commentary - Income-tax Act, 1961 (as amended by the Finance Act, 2026) - bharattax.co Treatise
Status: Spent for assessment years 1989-90 onwards (section 214(3)); succeeded by section 234C. Live only for earlier years.
Finance Act, 2026: No amendment.
Mechanism: Discretionary interest (15% p.a.) where the assessee under-estimated advance tax and under-paid either of the first two instalments (clause (a)), or wrongly deferred advance tax under section 213 (clause (b)) - for assessment years up to 1988-89.
Litigation profile: Spent; discretionary in character, sparse direct authority. Candour rule observed; deferment interest now mandatory under section 234C.
A. SECTION COMMENTARY
Section 216 charged interest where, on regular assessment, the Assessing Officer found that the assessee had either under-estimated the advance tax payable and thereby reduced the amount paid in either of the first two instalments (clause (a)), or had wrongly deferred payment of advance tax on a part of his income under section 213 (clause (b)). In either case the Assessing Officer 'may direct' the assessee to pay simple interest at fifteen per cent per annum - for the period of deficiency on the under-paid instalments (clause (a)) or for the period of wrongful deferment (clause (b)). The Explanation deems certain early instalments to fall due fifteen days after the expiry of six months from the commencement of the previous year.
A discretionary, deferment-focused interest
Two features distinguish section 216. First, it is discretionary - the Assessing Officer 'may direct' interest, unlike the mandatory interest of section 215; the discretion had to be exercised judicially, on a finding of under-estimate or wrongful deferment. Second, it targeted the timing of payment within the year (the front-loading of instalments and the deferment of commission income), as distinct from the year-end shortfall addressed by section 215. In the present scheme, the timing/deferment function of section 216 is performed by section 234C (interest for deferment of advance tax), while the shortfall function of section 215 is performed by section 234B.
Status today
Section 216 is spent for assessment years 1989-90 onwards (section 214(3)). It is reproduced for completeness; its successor, section 234C, makes deferment interest mandatory and formula-driven, removing the discretionary 'may direct' character that section 216 carried.
B. STATUTORY POSITION (verbatim text)
Reproduced verbatim from the Income-tax Act, 1961 (as amended up to the Finance Act, 2025); the Finance Act, 2026 makes no amendment to this section. Editorial "[Omitted...]" notes are those of the Legislature.
216. Where, on making the regular assessment, the Assessing Officer finds that any assessee has—
(a) under 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 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. Interest payable by assessee when no estimate made.
C. AUTHORITIES
Section 216 is spent for assessment years 1989-90 onwards; its deferment-interest function is now performed by the mandatory section 234C. There is little direct merits authority on the section's discretionary text; the candour rule is observed. All citations have been web-verified.
Cluster 1 - Discretionary deferment interest: character and successor
Section 216 turned on the Assessing Officer's discretion and on findings of under-estimate/deferment; reported authority is sparse and the candour rule is observed.
Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961 (SC)
Relevance: Interest of the section 216 type is compensatory and part of the assessment, and is appealable on the ground that the levy is not attracted; the discretion to charge it had to be exercised judicially.
Use: Supplies the character and appellate treatment of the deferment interest that section 216 imposed.
CIT v. Anjum M. H. Ghaswala (2001) 252 ITR 1 (SC) [Constitution Bench]
Relevance: The successor deferment interest (section 234C) is mandatory and not waivable - in contrast to the discretionary 'may direct' of section 216.
Use: Marks the change in character from the discretionary old section to the mandatory new one.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is omitted, spent or substantially unlitigated, the candour rule is observed - the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.
CHAPTER XVII - COLLECTION AND RECOVERY OF TAX - C.-ADVANCE PAYMENT OF TAX
Section 216 - Interest Payable by Assessee in Case of Under-estimate, etc.
Case Laws & Commentary - Income-tax Act, 1961 (as amended by the Finance Act, 2026) - bharattax.co Treatise
Status: Spent for assessment years 1989-90 onwards (section 214(3)); succeeded by section 234C. Live only for earlier years.
Finance Act, 2026: No amendment.
Mechanism: Discretionary interest (15% p.a.) where the assessee under-estimated advance tax and under-paid either of the first two instalments (clause (a)), or wrongly deferred advance tax under section 213 (clause (b)) - for assessment years up to 1988-89.
Litigation profile: Spent; discretionary in character, sparse direct authority. Candour rule observed; deferment interest now mandatory under section 234C.
A. SECTION COMMENTARY
Section 216 charged interest where, on regular assessment, the Assessing Officer found that the assessee had either under-estimated the advance tax payable and thereby reduced the amount paid in either of the first two instalments (clause (a)), or had wrongly deferred payment of advance tax on a part of his income under section 213 (clause (b)). In either case the Assessing Officer 'may direct' the assessee to pay simple interest at fifteen per cent per annum - for the period of deficiency on the under-paid instalments (clause (a)) or for the period of wrongful deferment (clause (b)). The Explanation deems certain early instalments to fall due fifteen days after the expiry of six months from the commencement of the previous year.
A discretionary, deferment-focused interest
Two features distinguish section 216. First, it is discretionary - the Assessing Officer 'may direct' interest, unlike the mandatory interest of section 215; the discretion had to be exercised judicially, on a finding of under-estimate or wrongful deferment. Second, it targeted the timing of payment within the year (the front-loading of instalments and the deferment of commission income), as distinct from the year-end shortfall addressed by section 215. In the present scheme, the timing/deferment function of section 216 is performed by section 234C (interest for deferment of advance tax), while the shortfall function of section 215 is performed by section 234B.
Status today
Section 216 is spent for assessment years 1989-90 onwards (section 214(3)). It is reproduced for completeness; its successor, section 234C, makes deferment interest mandatory and formula-driven, removing the discretionary 'may direct' character that section 216 carried.
B. STATUTORY POSITION (verbatim text)
Reproduced verbatim from the Income-tax Act, 1961 (as amended up to the Finance Act, 2025); the Finance Act, 2026 makes no amendment to this section. Editorial "[Omitted...]" notes are those of the Legislature.
216. Where, on making the regular assessment, the Assessing Officer finds that any assessee has—
(a) under 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 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. Interest payable by assessee when no estimate made.
C. AUTHORITIES
Section 216 is spent for assessment years 1989-90 onwards; its deferment-interest function is now performed by the mandatory section 234C. There is little direct merits authority on the section's discretionary text; the candour rule is observed. All citations have been web-verified.
Cluster 1 - Discretionary deferment interest: character and successor
Section 216 turned on the Assessing Officer's discretion and on findings of under-estimate/deferment; reported authority is sparse and the candour rule is observed.
Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961 (SC)
Relevance: Interest of the section 216 type is compensatory and part of the assessment, and is appealable on the ground that the levy is not attracted; the discretion to charge it had to be exercised judicially.
Use: Supplies the character and appellate treatment of the deferment interest that section 216 imposed.
CIT v. Anjum M. H. Ghaswala (2001) 252 ITR 1 (SC) [Constitution Bench]
Relevance: The successor deferment interest (section 234C) is mandatory and not waivable - in contrast to the discretionary 'may direct' of section 216.
Use: Marks the change in character from the discretionary old section to the mandatory new one.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is omitted, spent or substantially unlitigated, the candour rule is observed - the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.