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TMI BlogChanging Landscape of Interest on Delayed Payment of Tax on Accreted Income : Clause 352(7) of Income Tax Bill, 2025 Vs. Section 115TE of Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... XII-EB (Sections 115TD, 115TE, 115TF) by the Finance Act, 2016. The upcoming Income Tax Bill, 2025 proposes to consolidate, rationalize, and, in some respects, re-cast these provisions under Clause 352, seeking to address perceived gaps and clarify procedures. Of particular interest is Clause 352(7), which deals with the imposition of interest for non-payment of tax on accreted income, a subject matter currently governed by Section 115TE of the Income-tax Act, 1961. This commentary provides a detailed analysis of Clause 352(7), its objective, mechanics, and implications, followed by a thorough comparative analysis with existing Section 115TE. The discussion is contextualized within the broader legal and policy framework regulating the taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en there is a failure to pay, in whole or in part, the tax on accreted income within the prescribed time. * Persons Liable: The liability is joint and several, attaching to the specified person (i.e., the trust, institution, or other entity), as well as the principal officer or trustee. * Quantum of Interest: The interest is simple interest, calculated at 1% per month or part thereof, on the outstanding amount of tax. * Period of Interest: The period begins from the day immediately after the last date for payment (as prescribed in sub-section (5)), and ends on the date of actual payment, including any part of a month as a full month. * Formulaic Clarity: The formula provided (I = 1% of T*P) is intended to offer clarity and remove am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal (as per the Table in sub-section (5)), the starting point for interest computation is well-defined. However, disputes may arise if there is a delay in communication of the order or ambiguity about the "date of receipt." * Multiple Liable Persons: Where both the entity and the principal officer/trustee are liable, the mechanics of recovery and the apportionment of liability may require further clarification, especially in cases of insolvency or dissolution. * Nature of Interest: The provision specifies "simple interest," which is unambiguous. However, the possibility of compounding or penal interest in case of willful default is not addressed here. Practical Implications The imposition of interest at 1% per month is a significa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * Formulaic Expression: * Section 115TE sets out the interest rate and period in words, whereas Clause 352(7) explicitly provides a formula (I = 1% of T*P), enhancing clarity and reducing potential disputes over calculation. * Contextual Integration: * Clause 352(7) is part of a more comprehensive and integrated regime under the Income Tax Bill, 2025, which consolidates and harmonizes various provisions relating to accreted income, including detailed tables specifying dates and procedural steps. Section 115TE, by contrast, is tied to Section 115TD and is less integrated with other procedural provisions. * Scope of Application: * While both provisions refer to "specified person," the definition and scope under the new Bill may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd ease of administration. This is particularly important in the context of NPOs, where the potential for disputes over dates, amounts, and liability is significant. Practical Implications for Stakeholders * For Non-Profit Organizations: The provision underscores the need for robust internal controls and proactive compliance, especially in relation to registration, modification of objects, mergers, and dissolution. Trustees and principal officers must be vigilant, as personal liability for interest is expressly provided. * For Tax Administrators: The formulaic approach simplifies assessment and collection, reducing scope for disputes and administrative delays. * For Legal Advisors: There is an increased need to advise clients on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greater clarity, administrative efficiency, and procedural integration. The use of explicit formulas and detailed tables enhances predictability and reduces the scope for disputes, while the extension of liability to principal officers and trustees strengthens accountability. For stakeholders, the message is clear: compliance with the requirements relating to accreted income is not optional, and delays will be met with significant financial consequences. The provision reflects a broader policy commitment to safeguarding the integrity of the charitable sector while ensuring that tax benefits are not abused. As the law evolves, continued vigilance will be required to address emerging ambiguities and to ensure that the legislative intent is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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