Income-tax Act, 1961Section 220
- Demand payable within 30 days
- 1% per month interest on unpaid demand
- Stay/instalments at AO's discretion
Applies to FY 2025-26 (AY 2026-27) and earlier years.
IT Act 1961 → 2025 / Section 220
InterestSection 220 → Section 411
Time to pay a tax demand and interest on unpaid demand
Section 220 of the old Income-tax Act, 1961 · new section 411 under the Income-tax Act, 2025
New reference Section 411
Income-tax Act, 2025Section 411
- 30 days to pay (411(1))
- 1% per month interest (411(3))
- From 1 April 2026: no interest on a penalty demand under section 439 until the first appeal is decided (Finance Act 2026)
Applies from tax year 2026-27 (from 1 April 2026).
What changed
A real change: the Finance Act 2026 stops interest on penalty demands (section 439) running until the first appeal order (section 359), or the Tribunal's order (section 363) in DRP cases. A matching proviso was added to section 220(2) of the 1961 Act for assessments made on or after 1 April 2027.
Practice notes
- No double interest where interest is already charged under section 398(3).
Frequently asked
What is the interest on unpaid tax demand under the new Income Tax Act 2025?
1% per month under section 411(3); from 1 April 2026, not charged on penalty demands until the first appeal is decided.
What is section 220 called in the new Income-tax Act, 2025?
Section 220 of the Income-tax Act, 1961 corresponds to Section 411 of the Income-tax Act, 2025, which applies from 1 April 2026 (tax year 2026-27).
What changed in section 220 under the new Income Tax Act?
A real change: the Finance Act 2026 stops interest on penalty demands (section 439) running until the first appeal order (section 359), or the Tribunal's order (section 363) in DRP cases. A matching proviso was added to section 220(2) of the 1961 Act for assessments made on or after 1 April 2027.
Is section 220 still applicable for FY 2025-26?
Yes. Income of FY 2025-26 (AY 2026-27) and earlier years is governed by section 220 of the 1961 Act. Section 411 of the 2025 Act applies from tax year 2026-27.