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Key Points

The Finance Ministry has clarified a 3% interest rate on advance tax shortfalls in the Income Tax Bill 2025. The new bill simplifies tax laws while retaining key deductions. Taxpayers must pay in quarterly instalments to avoid penalties. The updated draft incorporates recommendations from the Parliamentary Select Committee.

Key Points: Finance Ministry Clarifies 3% Advance Tax Interest in IT Bill 2025

  • Finance Ministry fixes 3% interest for advance tax short payments
  • Taxpayers must pay in 4 instalments or face penalties
  • IT Bill 2025 replaces 60-year-old tax law with simplified structure
  • Select Committee incorporates 285 suggestions into revised draft
3 min read

Finance Ministry issues corrigendum to Income Tax Bill on advance tax interest

Finance Ministry issues corrigendum setting 3% interest on advance tax shortfall under Income Tax Bill 2025, aligning with 1961 Act provisions.

"The amendment specifies a 3% interest rate on shortfalls, bringing the clause in line with existing provisions. – Finance Ministry"

New Delhi, Aug 12

The Finance Ministry has issued a corrigendum to the Income Tax Bill, 2025, clarifying the interest applicable on short payment of advance tax. The amendment specifies a 3 per cent interest rate on such shortfalls, bringing the clause in line with provisions under the Income Tax Act, 1961.

The amendment specifies a 3 per cent interest rate on such shortfalls, bringing the clause in line with provisions under the existing act.

Under current rules, taxpayers with an annual tax liability of Rs 10,000 or more are required to pay advance tax in four instalments — on June 15, September 15, December 15, and March 15.

If a shortfall in payment occurs, even by a single day beyond the quarterly due date, interest is levied for a minimum period of three months.

The Income Tax Bill, 2025 — passed by the Lok Sabha on Monday — is set to replace the 60-year-old income tax law, with a focus on simplification through fewer chapters and reduced wordage.

Finance Minister Nirmala Sitharaman tabled the revised bill in the house on Monday, following the government’s decision to withdraw the earlier draft presented on February 13 this year.

To avoid confusion caused by multiple iterations, that version was withdrawn on August 8 after being sent to a Parliamentary Select Committee for review. All of the authorised changes are combined into a single updated text in the revised bill.

Most of the 285 suggestions made by the Select Committee, which was presided over by BJP MP Baijayant Panda, are included in the updated draft.

The key features of the Income Tax Bill, 2025 include the following:

- Companies that have chosen the new regime can also take advantage of deductions under Section 80M of the 1961 Act (Clause 148 of the IT Bill, 2025).

- Clause 93 of the 2025 bill provides deductions for family member gratuities and commuted pensions.

- Section 206 divides the provisions of the Minimum Alternate Tax (MAT) and the Alternate Minimum Tax (AMT) into two sub-sections.

- The AMT provisions only apply to non-corporations that have made deduction claims. LLPs with only capital gains income are not subject to AMT if there is no claim for a deduction.

- In clause 187, the word "profession" has been added after "business" to allow professionals who earn more than Rs 50 crore annually to use the designated electronic payment methods.

- With the removal of Clause 263(1)(ix), flexibility has been granted to allow refund claims in situations where the return is not filed promptly.

- IANS

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Reader Comments

P
Priya S
As a small business owner, I appreciate the government's effort to simplify tax laws. But why does the interest apply for minimum 3 months even if delay is just 1 day? This seems harsh for genuine cases.
R
Rohit P
Good move overall, but the government should conduct more awareness campaigns about these changes. Many taxpayers, especially in tier 2/3 cities, aren't fully aware of advance tax rules.
S
Sarah B
The inclusion of 'profession' after 'business' in clause 187 is a welcome change! Many consultants and doctors were facing issues with electronic payments. Small but significant improvement.
V
Vikram M
While simplification is good, I hope the government doesn't remove important provisions in the name of reducing wordage. The devil is often in the details when it comes to tax laws.
K
Kavya N
The flexibility in refund claims is much needed! So many people suffer when they miss filing deadlines by small margins. Hope this reduces unnecessary litigation. #GoodReform
M
Michael C
As an expat working in India, I find the new tax bill promising. The clearer structure should make compliance easier for foreign professionals like me. The 3% interest rate is reasonable compared to global standards.

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