Tax: Now this much interest will be charged on paying less advance tax, the government has made this big change..

The Finance Ministry on Tuesday made an important change by amending the Income Tax (No. 2) Bill, 2025. This change is regarding the interest charged on the underpayment of the advance tax. In the new amendment, the interest rate has been made in line with the provisions of the current Income Tax Act, 1961. Now, if a taxpayer pays less advance tax, then 3% interest will have to be paid on it.

When to pay advance tax

According to the rule, taxpayers whose annual tax liability is ₹ 10,000 or more have to deposit this amount as advance tax in four installments. These dates are fixed—15 June, 15 September, 15 December, and 15 March. If a taxpayer is unable to deposit the full amount on any one of these dates, then he has to pay interest. This interest is applicable only on the remaining amount.

What was the provision 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 advance tax shortfall is made up the next day, then only one month's interest of 1% will be charged. But this was not by the current law. Under the Income Tax Act, 1961, if there is a delay of even one day from the due date, then a minimum of three months' interest has to be paid. With the new amendment, this confusion was removed, and the interest provision was made as per the old law.

New Income Tax Bill passed in Lok Sabha.

Finance Minister Nirmala Sitharaman introduced the New Income Tax Bill 2025 in the Lok Sabha on 11 August 2025, and surprisingly, this bill was also passed by the Lower House in just four minutes. Preparations for this bill were going on for several days, and in Budget 2025, the Finance Minister had also announced to table it.

Now the next step is to get it passed in the Rajya Sabha. After getting approval from them and the signature of the President, it will become a law. With the implementation of the new law, it will replace the nearly 60-year-old Income Tax Act.

The government claims that this new law will be simple in terms of both structure and language, so that even the common taxpayer can understand it easily. However, the provision of the old law has been kept back in matters related to interest, so that the rules remain clear and uniform as before.

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