NEW DELHI: The Central Board of Direct Taxes (CBDT) on Tuesday announced new guidelines aimed at providing relief to taxpayers regarding the waiver and reduction of interest payable under Section 220(2) of the Income-tax Act.
As per the circular, tax officials at different levels will have authority to either waive off or reduce interest payable by a taxpayer, subject to conditions. The circular is effective immediately. As per the Income Tax Act, taxpayers who fail to pay the amount specified in a notice of demand will incur simple interest at a rate of 1% per month for any delay in payment. However, the CBDT has established specific monetary limits for income-tax authorities regarding the granting of waivers or reductions on this interest.
The notification stated the Principal Commissioner of Income Tax has the authority to grant waivers for amounts up to `50 lakh. For amounts between `50 lakhs and `1.5 crore, the Chief Commissioner of Income Tax (CCIT) or the Director General of Income Tax (DGIT) can exercise this authority. Furthermore, the Principal Chief Commissioner of Income Tax (Pr.CCIT) is empowered to grant waivers for amounts exceeding `1.5 crore.
As per the notification, the taxpayers must fulfil certain conditions for a waiver or reduction. They need to prove that the payment has caused genuine hardship, that the default was due to circumstances beyond their control, and that they have cooperated in all inquiries related to their assessment or recovery proceedings.
As per Rajat Mohan, senior partner, AMRG & Associates, “The recent circular introduces defined monetary limits for interest waivers under Section 220(2A) of the Income Tax Act, aiming to make the waiver process more transparent and efficient. By setting specific thresholds, the CBDT empowers officials at various levels to make quicker, more consistent decisions on waiver applications, thereby reducing administrative bottlenecks. “
“This structured approach encourages taxpayers facing genuine hardships such as financial stress beyond their control to apply for relief confidently, knowing that their applications will be assessed against clearly defined criteria, including uncontrollable circumstances and full cooperation with tax authorities. The circular provides much-needed clarity for taxpayers, especially those who may have previously been unsure about their eligibility for relief or deterred by the lack of a standardized process,” Mohan added.