The Central Board of Direct Taxes (CBDT) has issued Circular No. 13/2025 dated September 19, 2025, granting relief to taxpayers affected by additional demands raised due to rectifications in income tax returns.
The issue arises under section 115BAC(1A) of the Income-tax Act, 1961, which governs the new tax regime. Incomes chargeable at special rates under Chapter XII are excluded when determining liability, and rebates under section 87A apply only to regular incomes under this section.
However, in some processed returns, the rebate under section 87A was mistakenly allowed on incomes taxed at special rates. The Centralized Processing Centre (CPC) has since initiated rectifications, resulting in fresh demands on taxpayers.
To ease compliance, the CBDT has invoked its powers under section 119 to waive interest payable under section 220(2), provided taxpayers settle such demands by December 31, 2025.
Official copy of the circular is as follows
The provisions of section 115BAC(1A) of the Income-tax Act, 1961 ('the Act') are subject to the other provisions of Chapter XII of the Act. Therefore, incomes chargeable to tax at special rates as specified under various provisions of Chapter XII of the Act are not included while determining the chargeability to tax under section 115BAC(1A) of the Act. Further, the clause (b) of proviso to section 87A is applicable to incomes chargeable to tax under section 115BAC(1A) of the Act.
It is noticed that in certain cases, the returns had already been processed and rebate was allowed under section 87A of the Act on incomes chargeable to tax at special rates. In such cases, rectifications have to be carried out to disallow such rebate, which has been incorrectly allowed. Such rectifications will result in demands getting raised. If the payments of such demands raised are delayed then the same are liable for charging of interest under section 220(2) of the Act.
In order to mitigate the genuine hardship arising to such taxpayers on account of interest payable under section 220(2) of the Act, the Central Board of Direct Taxes ('the Board'), in exercise of its powers conferred under section 119 of the Act, directs that the interest payable under section 220(2) of the Act shall be waived in such cases where the payments of the demands raised, as referred to in para 2, are made by 31.12.2025.
In such cases, if a taxpayer fails to pay the demand raised as a result of rectification order passed by the CPC on or before 31.12.2025, the interest shall be charged under section 220(2) of the Act from the day immediately following the end of the period mentioned in sub-section (1) of section 220 of the Act.
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