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Aug 12, 2025
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Has the penal interest increased from 1% to 3% on advance tax payment in the new income tax bill 2025? Here’s what CAs say
The Lok Sabha Select Committee recommended correcting a drafting error regarding how interest is calculated for shortfalls in advance tax payments. The revised Income Tax Bill 2025 that was introduced in the parliament yesterday (August 11, 2025) had a drafting error that stated:”the assessee shall be liable to pay simple interest at the rate of 1% for every month or part of a month, for the period….”.
The select committee proposed that the penal interest for these shortfalls should be set at 3% for the first three installments and then drop to 1% for the final installment.
So essentially there is no change to the advance tax shortfall interest law as outlined in the Income Tax Act, 1961 and New Income Tax Bill, 2025.
What did the Lok Sabha Select Committee say in the corrigendum?
As per the Lok Sabha Select Committee Corrigendum, this is what the select committee said:
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