Intro:
The Finance Ministry has issued a corrigendum to the Income Tax Bill 2025, clarifying how interest on advance tax shortfall is to be calculated. This update is important for taxpayers, professionals, and companies managing large tax outflows.
What Triggered the Corrigendum?
- The original Finance Bill, 2025 (as passed by Lok Sabha), had a drafting gap related to the computation of interest under Section 234C.
- It was unclear whether shortfall in advance tax, especially due to under-estimation of certain incomes like capital gains or lottery winnings, would attract penal interest.
- The Ministry of Finance issued a corrigendum dated 3 August 2025 to rectify this ambiguity.
What the Corrigendum Clarifies
Here’s what the corrigendum to the Income Tax Bill 2025 now states:
| Particulars | Before Corrigendum | After Corrigendum (03.08.2025) |
|---|---|---|
| Section Impacted | 234C | 234C |
| Type of Income | Capital gains, casual income | Capital gains, casual income |
| Advance Tax Interest Applicability | Unclear | No interest under 234C for such incomes |
| Legal Language | Missing clause | Clause inserted to align with earlier law |
Legal Reference
- Section 234C of the Income-tax Act, 1961 provides for interest on deferred payment of advance tax.
- The proviso to sub-section (1) was missing in the Lok Sabha-passed version, leading to confusion.
- The corrigendum restores the earlier beneficial proviso as it stood before.
Corrigendum Source: prsindia.org
Why This Matters for Taxpayers
- Investors who realise capital gains in Q3 or Q4 don’t need to worry about Section 234C interest for underpayment in earlier quarters.
- Businesses earning sudden income (like arbitration awards or export orders) now have relief from penal advance tax interest.
- Tax planners can confidently use provisional tax projections without fearing retroactive interest for such cases.
Action Points for FY 2025–26
- Revisit advance tax workings for Q2 due on 15 September 2025.
- Update your tax calculator or software to reflect the corrigendum.
- CA Firms: Inform clients with capital gains about this change for better tax planning.
FAQs
Q1. Will I be charged interest under 234C for capital gains earned in March 2026?
No, if the gain was not anticipated in earlier quarters, no interest is applicable.
Q2. Does this apply to all taxpayers?
Yes, both individuals and businesses benefit from this corrigendum.
Q3. Is any new notification required?
No. The corrigendum itself is effective and part of the Finance Bill 2025 legislative record.
Final Words
The Income Tax Bill 2025 corrigendum on interest on advance tax shortfall restores fairness in tax compliance. If you’re unsure how this impacts your case, consult an expert — or let Efiletax handle your advance tax planning and filings, accurately and on time.
Start your tax planning with Efiletax today.
Summary
The Finance Ministry’s corrigendum to the Income Tax Bill 2025 clarifies that no interest under Section 234C will apply on shortfall in advance tax due to capital gains or unforeseeable income. A relief for taxpayers facing mid-year or sudden income gains.