LS Select Committee Recommends Correcting Draft Error In Revised I-T Bill 2025

New Delhi: The Lok Sabha Select Committee on Tuesday recommended correcting a key drafting error in the revised Income Tax Bill 2025, ensuring that the long-standing rules for charging penal interest on shortfalls in advance tax payments remain intact. The correction comes via a formal corrigendum issued on August 11, a day after the revised Bill was tabled in Parliament.

The corrigendum to the new Income Tax Bill with regard to interest to be charged on short payment of advance tax by a taxpayer was notified by the finance ministry. The revised Income Tax Bill 2025 that was introduced in the Lok Sabha on Monday had a drafting error stating, “the assessee shall be liable to pay simple interest at the rate of 1 per cent for every month or part of a month, for the period….”.

However, the select committee proposed that the penal interest for these shortfalls should be set at 3 per cent for the first three installments and then drop to 1 per cent for the final installment. “The corrigendum, which provides for 3 per cent interest on short payment of advance tax, aligns the clause with the existing provisions in the Income Tax Act, 1961,” the finance ministry said.

A taxpayer whose total tax liability is more than Rs 10,000 after adjusting tax deducted at source or TDS in a fiscal year must pay advance tax. It applies to all categories of taxpayers, including – freelancers, professionals, salaried and senior citizens. However, taxpayers having a tax liability of Rs 10,000 or more have to pay advance tax in 4 instalments — June 15, September 15, December 15 and March 15.

As per clause 425 of the Income-tax (No 2) Bill, 2025, if the advance tax shortfall is made good by the next day of the quarterly due date, interest would be charged for one month at 1 per cent. However, taxation experts feel that with this correction, there may not be any financial burden on taxpayers. “The corrigendum does not imply that the penal interest on advance tax has been tripled across all periods,” said CA Dr Suresh Surana.

Nangia Andersen LLP, Partner, Sandeep Jhunjhunwala also said that as per the corrigendum to Clause 425 of the Income-tax (No 2) Bill, 2025, the interest provision for shortfall in advance tax payment has now been aligned with that under the Income-tax Act, 1961.

“If there is a shortfall in remittance of advance tax even for a day beyond the statutory quarterly due date, interest is charged for a minimum of 3 months,” Junjhunwala said, adding that the provision was not in alignment with the current tax laws, and this ambiguity has now been restored and aligned with the existing provisions itself.