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Business Standard
7 days ago
- Business
- Business Standard
Finmin clears the air: Advance tax penal interest stays at 3%, no increase
In a welcome relief for taxpayers, the Finance Ministry on Tuesday issued a corrigendum to correct a drafting error in the newly introduced Income Tax Bill, 2025. The amendment clarifies that penal interest on shortfalls in advance tax payments remains unchanged at 3% per quarter (1% per month for three months). Previous confusion had sparked concern that the interest rate was increased to 3% per month. Taxpayers with an annual tax liability of ₹10,000 or more must pay advance tax in four instalments — on June 15, September 15, December 15, and March 15. Senior citizens without business income are generally exempt from this rule. The corrigendum matters for those who miss these deadlines or pay less than the required instalment, as the resulting interest charges can quickly become substantial. What the Drafting Error Said The draft clause (Clause 425) in the newly tabled Income Tax Bill incorrectly specified interest of 1% per month or part of a month on the shortfall in advance tax payments. Though seemingly benign, this change implied a maximum monthly interest of 1% for every month delayed, prompting concerns the rate might effectively rise to 3% monthly. What the Corrigendum Fixes The updated wording restores the original intent under Section 234C of the Income Tax Act, 1961: 3% per instalment (charged once for up to three months) when the taxpayer misses deadlines on June 15, September 15, or December 15 instalments. 1% interest applies only to the March 15 instalment. 'Interest is charged for a minimum of three months even if there is a delay of a single day beyond the due date,' as per Sandeep Jhunjhunwala, Partner, Nangia Andersen LLP. Why It Matters for Taxpayers No increased burden: The corrigendum ensures the tax regime remains exactly as it was—1% interest for each delayed instalment, translating to a 3% penalty for quarterly defaulters, not a punitive 3% monthly charge. Maintained clarity: The simplified tabular presentation clarifies the structure, reducing calculation errors or misinterpretations. Calculation in Practice If you owe ₹5 lakh in advance tax: By June 15, ₹75,000 is due. If you pay only ₹50,000, there's a shortfall of ₹25,000. You owe ₹750 interest (₹25,000 × 1% × 3 months). If by September 15 you've paid ₹1.70 lakh (short ₹55,000), interest is ₹1,650 for the next quarter. Total due: ₹2,400 in interest—exactly what the old law required. Bottom Line for You No change in the financial impact of missing deadlines—just better clarity in the law's wording. If you pay advance tax a day late, you're liable for the full 3% penalty per instalment, not a cumulative monthly charge. The correction reduces uncertainty, ensuring taxpayers avoid unintended overpayments and calculation errors. Lok Sabha passes revised new I-T Bill 2025 The Lok Sabha, on August 11, passed the modified new Income-Tax Bill, 2025 and the Taxation Laws (Amendment) Bill, 2025, shortly after Finance Minister Nirmala Sitharaman tabled the revised version in Parliament. Now, the Bill must be passed by the Rajya Sabha to replace the current Act, and then it will seek the President's nod. Once enacted, the new I-T Bill will replace the archaic six-decade-old income tax law. "The biggest advantage of the new law is that a common man may easily understand it with lesser efforts as compared to the old law. The revised bill has incorporated most of the changes recommended by the Select Committee. The new regime announced in Budget 2025 will remain in the new Bill and the tax-payers still have to undergo the process of assessing the right regime to follow while filing tax return. Similarly, no changes are proposed in tax rates as introduced in Budget 2025," said Preeti Sharma, Partner, Global Employer Services, Tax & Regulatory Services, BDO India
Time of India
12-08-2025
- Business
- Time of India
What is the New Income Tax Bill 2025? Income Tax Act 1961 to be replaced; top points taxpayers should know
Finance Minister Nirmala Sitharaman presented the updated version of the I-T bill to Parliament. The New Income Tax Bill has been passed by the Lok Sabha, marking a significant reform to modernise the longstanding income tax legislation for both individuals and corporations. The New Income Tax Bill 2025 aims to simplify tax procedures and reduce compliance requirements for taxpayers. Finance Minister Nirmala Sitharaman presented the updated version of the I-T bill to Parliament, which included changes suggested by the Parliamentary Select Committee. She had previously withdrawn the initial bill, introduced on February 13, on August 8. The Parliamentary Select Committee, under the leadership of BJP member Baijayant Panda, reviewed the I-T Bill 2025 and finalised their report on the proposed legislation in the previous month. "Almost all of the recommendations of the Select Committee have been accepted by the government. In addition, suggestions have been received from stakeholders about changes that would convey the proposed legal meaning more accurately," said the Objects and Reasons section of the Income Tax (No.2) Bill. The parliamentary committee proposed 285 suggestions to streamline and update the taxation framework. New Income Tax Bill 2025 : Top points to know The proposed legislation reduces text volume and sections by approximately 50%, presenting provisions in a more straightforward and comprehensible manner. It simplifies the taxation timeline by eliminating the complex distinction between assessment year and previous year, introducing a unified "tax year" concept. The revised I-T bill introduces provisions for taxpayers to claim refunds even when returns are submitted after deadlines, which should provide significant relief to individuals filing their taxes. The New Income Tax Bill 2025 retains existing provisions for carrying forward losses, provides tax relief on anonymous donations to religious trusts, and adjusts MSME (micro, small and medium enterprises) classifications to align with the MSME Act, incorporating the panel's suggested modifications. The duration for submitting TDS correction statements has been shortened to two years from the previous six years under the Income-tax Act, 1961. According to I-T department officials, this reduction should substantially decrease complaints from deductees. The New Income Tax Bill has additionally provided explicit clarification regarding deductions applicable to commuted pension and gratuity payments received by family members. Tax experts indicated that the reforms would simplify compliance procedures for individuals, organisations, MSMEs whilst fostering a reliable, foreseeable and lucid taxation framework, essential for maintaining domestic spending, drawing overseas investments and backing economic expansion. Gouri Puri, partner, Shardul Amarchand Mangaldas and Co noted that the initial proposal created uncertainty, particularly concerning residential property taxation, pension deductions and reimbursement procedures for late submissions. "The revised bill addresses these gaps to simplify interpretation, reduce disputes and promote fairness," said Puri. The updated I-T Bill seeks to remove unnecessary and duplicate clauses for improved navigation, systematically reorganising sections for easier reference. It employs straightforward terminology to enhance accessibility and has eliminated outdated provisions to achieve better clarity. The requirement for compulsory investment and deposit of deemed accumulated income, previously set at 15% of regular income in designated modes, has been eliminated. Additionally, clause 187 has been expanded by incorporating the term "profession" following "business", allowing professionals whose total receipts surpass Rs 50 crore annually to access prescribed electronic payment methods. "The withdrawal of the earlier I-T bill and the introduction of a revised version demonstrates the government's responsiveness to stakeholder feedback and the Select Parliamentary committee's recommendations," said Gouri Puri said. Stay informed with the latest business news, updates on bank holidays , public holidays , current gold rate and silver price .
Time of India
11-08-2025
- Business
- Time of India
Lok Sabha approves updated I-T bill, to ease compliance burden
Lok Sabha NEW DELHI: Lok Sabha on Monday approved the Income Tax Bill 2025 - a key reform aimed at revamping the decades old income tax law for individuals and companies, making it simple for taxpayers and easing the compliance burden. Earlier, FM Nirmala Sitharaman introduced the revised and updated version of the I-T bill in Parliament, incorporating recommendations of the Select committee of Parliament. On Aug 8, FM had withdrawn the earlier bill, which was introduced in the house on Feb 13. The Select committee of the Lok Sabha headed by BJP's Baijayant Panda had examined the I-T Bill 2025 and adopted the report on the draft legislation last month. The parliamentary panel had suggested 285 recommendations on the draft legislation, aimed at simplifying and modernising the country's tax laws. "Almost all of the recommendations of the Select Committee have been accepted by govt. In addition, suggestions have been received from stakeholders about changes that would convey the proposed legal meaning more accurately," according to the statement of Objects and Reasons of the Income Tax (No.2) Bill. " For TDS correction statements, the time period for filing statements has been reduced to two years from six years in the Income-tax Act, 1961. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like listen now on spotify samy Listen Now Undo I-T department sources said this is expected to reduce the grievances of deductees significantly. Flexibility has been provided in the new I-T bill for allowing refund claims in cases where the return is not filed on time, a move which is expected to come as a major relief for taxpayers. Tax experts said the reforms are expected to ease compliance for individuals, companies, MSMEs and promote a stable, predictable and transparent tax system, key for sustaining domestic consumption, attracting foreign investment and supporting growth. "The withdrawal of the earlier I-T bill and the introduction of a revised version demonstrates govt's responsiveness to stakeholder feedback and the Select Parliamentary committee's recommendations," said Gouri Puri, partner, Shardul Amarchand Mangaldas and Co. Puri said the original draft raised concerns about ambiguities, particularly regarding house property taxation, pension deductions, and the refund process for delayed filings. "The revised bill addresses these gaps to simplify interpretation, reduce disputes and promote fairness," said Puri. The new I-T Bill also aims to eliminate redundant and repetitive provisions for better navigation, reorganising sections logically to facilitate case of reference. It has opted for simplified language to make the law more accessible and has removed obsolete and redundant provisions for greater clarity. Mandatory investment and deposit of deemed accumulated income of 15% of regular income in specified modes has been done away with. The word "profession" has been added after "business" in clause 187 to enable professionals with total receipts exceeding Rs 50 crore in a year the facility of prescribed electronic modes of payment. Stay informed with the latest business news, updates on bank holidays , public holidays , current gold rate and silver price .
