Comparison of section 425 "Interest for deferment of advance tax." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

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....mber, 15 December and 15 March. Effective date or enactment/commencement is Not stated in the document. Background & Scope Statutory hooks: section 425 (Interest for deferment of advance tax) read with section 404 (advance tax liability) and other cross-references within the Income-tax framework (e.g., section 2(40), sections 206, sections 157, 159, 160). The provision addresses interest chargeable on the shortfall of advance tax instalments compared to "tax due on the returned income." The text provides definitions and computational adjustments for "tax due on the returned income" in sub-section (5) and a specialized definition for "dividend" in sub-section (6). No express commencement or transitional provisions are stated in the documen....

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....tion (5) defines "tax due on the returned income" as tax on total income declared in the return reduced by amounts of tax deducted/collected at source (Chapter XIX-B), reliefs u/ss 157, 159(1) and 159(2), deductions u/s 160, and specific tax credits referenced in section 206 sub-clauses. Sub-section (6) defines "dividend" by reference to section 2(40) but excludes sub-clause (e) thereof. Interpretation The text signals a legislative intent to (a) anchor interest liability to a taxpayer's "tax due on the returned income" thereby linking advance tax instalments to the final declared tax; (b) set graduated instalment percentages and modest interest rates on shortfalls (3% on interim shortfalls, 1% on final shortfall), and (c) provide rel....

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....tfall attributable to that capital gains underestimation. * Assessee C (declaring profits u/s 58(2) Table Sl. No.1) pays less than 100% of tax due on returned income by 15 March; sub-section (3) prescribes simple interest at 1% on the shortfall. Interplay Section 425 cross-refers to section 404 (advance tax liability), Chapter XIX-B (TDS/TCS) and relief/deduction provisions (sections 157, 159, 160) and specific sub-clauses of section 206. The Act's specified cross-references to multiple sub-clauses of section 206 in sub-section (5)(f) refine the calculation base for "tax due on the returned income." There is no mention in the text of interacting Notifications, Rules, or Circulars beyond these statutory cross-references-any administr....

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....tation. The exact practical effect depends on the content of the referenced provisions (not stated in the document). * Addition of a specific definition for "dividend": * Bill: No separate subsection defining "dividend" is present in the Bill text provided. * Act: Sub-section (6) expressly provides that "dividend" has the meaning in section 2(40), but excludes sub-clause (e) thereof. Practical impact: The Act clarifies that not all items falling under the general statutory definition of "dividend" are included for the purposes of section 425; exclusion of sub-clause (e) narrows the scope. This affects whether a taxpayer's dividend receipts are treated as part of the income that must be considered when assessing shortfall excep....

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....es in later instalments or by 31 March. For reliance on safe-harbour thresholds (sub-section (2)), contemporaneous payment records are essential. Key Takeaways * Section 425 imposes interest on shortfalls in advance tax instalments tied to specified instalment percentages and due dates (15 June, 15 September, 15 December, 15 March). * Interest rates are modest: 3% on shortfalls for the first three instalments and 1% for the final instalment; a 1% simple interest applies for certain assessees under sub-section (3). * Safe-harbour thresholds (12% by 15 June; 36% by 15 September) can eliminate interest liability under sub-section (1) if met. * Shortfalls attributable to specified late-arising incomes (capital gains; certain incomes u/....