Section 425 — Interest for deferment of advance tax

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