New Income Tax Bill: The Finance Ministry on Tuesday, August 12, 2025, made an important amendment in the Income Tax (No. 2) Bill, 2025. This amendment relates to the interest charged on underpayment of advance tax. Under the new provision, the interest rate has been brought in line with the existing rules of the Income Tax Act, 1961. Now if a taxpayer is unable to deposit the advance tax amount on time, he will have to pay 3% interest on the remaining amount.
When and how is advance tax to be deposited?As per the rules, taxpayers whose annual tax liability is ₹10,000 or more have to deposit this amount as advance tax in four installments. These installments are payable on the following dates:
- 15 June: First installment
- 15 September: Second installment
- 15 December: Third installment
- 15 March: Fourth installment
If the taxpayer fails to deposit the stipulated amount on any of these dates, he has to pay interest on the outstanding amount. This interest is applicable only on the remaining amount, giving taxpayers the option of partial payment as well.
What was there earlier, what has changed now?According to Sandeep Jhunjhunwala, partner, Nangia Andersen LLP, earlier there was a provision in clause 425 of the bill that if the shortfall in advance tax is made good on the next day itself, then only one month's interest would be charged at the rate of 1%. However, this provision did not match the current rules of the Income Tax Act, 1961. Under the old law, if there is a delay of even one day from the due date, then at least three months' interest has to be paid. The new amendment has removed this confusion and the calculation of interest has been made 3% in line with the old law. This will ensure clarity and uniformity in the rules.
New Income Tax Bill passed in four minutes in Lok SabhaFinance Minister Nirmala Sitharaman introduced the New Income Tax Bill, 2025 in the Lok Sabha on August 11, 2025. Surprisingly, the bill was passed by the Lok Sabha in just four minutes. The Finance Minister had announced the introduction of this bill in Budget 2025, and its preparation was going on for several months.
Next step: Rajya Sabha and President's approvalNow this bill will be introduced in the Rajya Sabha. After getting approval from there and the signature of the President, it will become a law. After coming into force, this new law will replace the nearly 60-year-old Income Tax Act, 1961. The government claims that the new law will be simple in terms of both structure and language, so that the common taxpayer will be able to understand it easily.
Provisions of old law retainedAlthough the new law emphasizes simplicity, the provisions related to interest on advance tax have been retained from the old law. This ensures that the rules remain clear and uniform, so that there is no confusion for taxpayers. This amendment will not only improve the administrative process, but will also make it easier for taxpayers to follow the rules.
