Section 425 — Interest for Deferment of Advance Tax | ITA 2025

Section 425 of the Income-tax Act, 2025 corresponds to s. 234 C of the Income-tax Act, 1961. STATUTORY ARCHITECTURE Interest for shortfall in instalments: 1% per month for 3 months (or 1 month for last instalment). Default benchmarks: 15%…

Section 425 — - INTEREST FOR DEFERMENT OF ADVANCE TAX

Section 425 of the Income-tax Act, 2025 corresponds to s. 234C of the Income-tax Act, 1961.

Statutory text — Income-tax Act, 2025

(1) Where in any tax year, an assessee, liable to pay advance tax under section 404, other than the assessee mentioned in sub-section (3), has failed to pay such tax, or the advance tax paid by the assessee on its current income on or before the date specified in column B of the Table below, is less than advance tax due on returned income, as specified in column C, then the assessee shall be liable to pay interest on the amount of shortfall of advance tax as specified in column D, at the rate of interest specified in column E:—

TABLE Sl. Due date of Advance tax due on Amount of Shortfall Interest No. Instalment returned income of advance tax being payable on advance tax due as per shortfall as column C, as reduced specified in by advance tax already column D paid on or before the date specified in column B A B C D E 1. 15th day of 15% of the tax due on Shortfall till 15th 3% June returned income. day of June 2. 15th day of 45% of the tax due on Shortfall till 15th 3% September. returned income. day of September 3. 15th day of 75% of the tax due on Shortfall till 15th 3% December. returned income. day of December 4. 15th day of 100% of the tax due Shortfall till 15th 1%. March. on returned income. day of March

(2) The assessee shall not be liable to pay any interest under sub-section (1), if the advance tax paid by the assessee on the current income,—

(a) on or before the 15th day of June is 12% or more of the tax due on the returned income;

(b) on or before the 15th day of September is 36% or more of the tax due on the returned income.

(3) An assessee who declares profits and gains as per section 58(2) (Table: Sl. No. 1 or 3) or, who is liable to pay advance tax under section 404, has failed to pay such tax, or the advance tax paid by the assessee on its current income on or before the 15th day of March is less than the tax due on returned income, shall be liable to pay simple interest at the rate of 1% on the amount of shortfall from the tax due on returned income.

(4) No interest shall be payable under sub-section (1) or (3) in respect of shortfall in the payment of tax due on returned income, where,—

(a) the shortfall is on account of under estimation of, or failure to estimate the following income:—

(i) capital gains;

(ii) income as per section 2(49)(n);

(iii) income under the head profits and gains of business or profession accruing or arising for the first time;

(iv) dividend income; and

(b) the assessee has paid in full, the tax payable on the said income had such income been part of total income, in any of the remaining instalments of advance tax, if any, or by the 31st day of March of the tax year.

(5) For the purposes of this section “tax due on the returned income” means the tax chargeable on the total income declared in the return of income furnished by the assessee for the tax year in which the advance tax is paid or payable, as reduced by the amount of—

(a) any tax deducted or collected at source as per the provisions of Chapter XIX-B on any income which is subject to such deduction or collection and which is taken into account in computing such total income;

(b) any relief of tax allowed under section 157;

(c) any relief of tax allowed under section 159(1) on account of tax paid in a country outside India;

(d) any relief of tax allowed under section 159(2) on account of tax paid in a specified territory outside India referred to in that section;

(e) any deduction, from the Indian income-tax payable, allowed under section 160, on account of tax paid in a country outside India; and 2 [(f) any tax credit allowed to be set off as per section 206(2)(e) to (h) and 206(3) and (4).]

(6) For the purposes of this sub-section, the expression “dividend” shall have the meaning assigned to it in section 2(40), but shall not include sub-clause (e) thereof. Interest on excess refund.

STATUTORY ARCHITECTURE

Interest for shortfall in instalments: 1% per month for 3 months (or 1 month for last instalment). Default benchmarks: 15% by 15-Jun (12% required), 45% by 15-Sep (36% required), 75% by 15-Dec (75% required), 100% by 15-Mar.

CARVE-OUTS

Capital gains, dividend, lottery winnings: deferment exempted if tax thereon paid by next instalment after the income arose. New section 425 preserves this beneficial rule.

PRACTITIONER PLANNING NOTES

Capital gains carve-out: pay tax on CG by NEXT instalment after CG accrued -- protects against retro interest.
First-time advance tax payer -- no relief; full s. 425 applies.
Senior citizens not having PGBP: exempt from advance tax altogether (s. 207(2)) -- no s. 425 either.

CROSS-REFERENCES

s. 423 / 424 / 425 / 426 -- interest framework.
s. 412 (default & demand).
s. 446-448 (penalty Chapter).

← All sections (537)Act 2025 hub

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
2025 provision	1961 counterpart
s. 425 -- Interest for Deferment of Advance Tax	s. 234C