Finance Ministry Clarifies Interest Rules on Advance Tax Shortfall in Income Tax Bill 2025
The Indian Finance Ministry has issued a significant corrigendum to the Income Tax Bill 2025, specifically addressing interest charges related to shortfalls in advance tax payments. This change comes after concerns and clarifications were raised post the introduction of the new bill and aims to align the proposed legislation with established tax norms.
What Is the Advance Tax Correction?
Advance tax is a system where taxpayers with a yearly liability of ₹10,000 or more pay taxes in installments throughout the financial year.
The corrigendum clarifies the interest rate that will apply if there is a shortfall in advance tax payments.
The specified interest rate is 3% on such shortfalls, which brings the new law into harmony with provisions under the existing act, preventing any unexpected hike for taxpayers.
Why Did the Finance Ministry Issue This Corrigendum?
The initial draft of the Income Tax Bill 2025 contained ambiguities about the interest rate on advance tax shortfalls. This created concerns among taxpayers about the possibility of a higher financial penalty under the new law.
With the corrigendum:
The law now clearly states that the interest for shortfall remains at 3%.
This is reassuring for individuals, businesses, and tax professionals who rely on predictability and stability in tax rules.
Who Does This Impact?
Anyone with tax liability of ₹10,000 or more per year.
Senior citizens without business income are generally exempt from advance tax.
The change ensures those who miss advance tax installments won't face steeper penalties than before.
Other Key Points from the Income Tax Bill 2025
The bill, recently passed by the Lok Sabha, incorporates most recommendations from the Parliamentary Select Committee.
It aims to modernize, streamline, and clarify India’s tax laws for individuals and businesses.
Practical Takeaways
The interest for shortfalls in advance tax remains at 3%, not higher under the new bill.
Those paying advance tax should calculate installments carefully to avoid this charge.
Stay updated, as the government may issue further clarifications as the bill is implemented.
This move by the Finance Ministry indicates a commitment to taxpayer fairness and legislative clarity in the evolving Indian tax landscape.
Reviewed by Aparna Decors
on
August 13, 2025
Rating:
