The Central Board of Direct Taxes (CBDT) has issued Circular No. 05/2025, providing relief to taxpayers facing interest levies under Section 201(1A)(ii) and Section 206C(7) of the Income-tax Act, 1961. The circular allows a waiver of interest on delayed payments of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) caused by technical glitches beyond taxpayers' control.
Key Highlights of the Circular
Eligibility for Interest Waiver:
- The waiver applies to cases where TDS/TCS payments were initiated on or before the due date, but the credit to the Central Government was delayed due to technical issues.
- Taxpayers affected by system failures that resulted in automatic interest levies under Section 201(1A)(ii) or 206C(7) can seek relief.
Authority to Grant Waiver:
- The waiver or reduction of interest will be granted by the Chief Commissioner of Income-tax (CCT), Director General of Income-tax (DGIT), or Principal Chief Commissioner of Income-tax (PCCIT) after verifying the technical issue.
Application Process & Timeline:
- Applications must be filed within one year from the end of the financial year for which interest is charged.
- The respective authority must dispose of applications within six months of receipt after providing the taxpayer with an opportunity to be heard.
Refund of Paid Interest:
- If interest has already been paid, the waiver will allow a refund to the deductor/collector.
Finality of Order:
- The decision made by the CCT, DGIT, or PCCIT will be final and non-appealable.
Text of the Official Circular is as follows
Section 201(1A) of the Income-tax Act (hereinafter "the Act") provides for levy of interest on account of failure to deduct or pay the deducted tax to the credit of the Central Government by the deductor. Further, section 206C(7) of the Act provides for levy of interest on account of failure to collect or pay the collected tax to the credit of the Central Government by the collector.
Representations have been received by the Central Board of Direct Taxes (hereinafter "the Board") that while making payments of taxes deducted at source (TDS) and taxes collected at source (TCS) to the credit of the Central Government as per section 200 and 206C of the Act, the taxpayers have encountered technical glitches. On account of such glitches, while the payment is initiated by the taxpayers/ deductors/ collectors and the amounts are debited from their bank accounts on or before the due date, the actual credit to the Central Government is done after the due date. In such cases, notices have been received by such taxpayers for levy of interest under section 201(1A)(ii)/ 206C(7) of the Act, as the case maybe.
In exercise of the powers under section 119 of the Act, the Board, hereby directs that the Chief Commissioner of Income-tax (CCT) or Director General of Income-tax (DGIT) (or in case there is no CCT and DGIT, then Principal Chief Commissioner of Income-tax (PCCIT)) may reduce or waive interest charged under section 201(1A)(ii) / 206C(7) of the Act in the class of cases where:
- the payment is initiated by the taxpayers/ deductors/ collectors and the amounts are debited from their bank accounts on or before the due date, and
- the tax could not be credited to the Central Government, before due date because of technical problems, beyond the control of the taxpayer/ deductor/ collector.
The CCT or DGIT or PCCIT, as the case maybe, examining an application for waiver of interest under this order shall pass a speaking order after providing adequate opportunity of being heard to the applicant and after verification of technical glitches from the bank/Directorate of Systems.
Even if the interest under section 201(1A)(ii)/ 206C(7) of the Act has already been paid by the taxpayer, the same can be considered for waiver and a refund maybe given to the deductor, if waiver is ordered.
No waiver application shall be entertained beyond one year from the end of the financial year for which the interest under section 201(1A)(ii)/ 206C(7) of the Act is charged.
An application received for waiver of interest under section 201(1A)(ii)/ 206C(7) of the Act shall be disposed of within a period of six months from the end of the month in which such application is received.
The order issued by the CCTIT or DGIT or PrCCIT, as the case maybe, shall be final and no petition against that order shall be entertained by the Board.
Official copy of the circular has also been attached
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