Income Tax Department has issued fresh guidelines allowing tax officials to either waive or reduce the interest that taxpayers owe on delayed payments, provided certain conditions are met.
This adjustment is intended to streamline the relief process, especially for taxpayers facing financial hardships.
What the law says
Under Section 220(2A) of the Income Tax Act, taxpayers who miss the deadline for paying a demand notice amount are charged a 1% monthly interest on the overdue amount.
However, in specific cases, senior tax officials can approve a waiver or reduction of this interest if certain requirements are satisfied.
Who can approve waivers or reductions?
The Central Board of Direct Taxes (CBDT) issued a circular on November 4 that outlines the monetary limits for waivers or reductions based on the rank of the tax official:
Principal Chief Commissioner (PrCCIT): Can decide on waivers or reductions for interest amounts exceeding ₹1.5 crore.
Chief Commissioner (CCIT): Authorised to handle waivers or reductions on interest amounts between ₹50 lakh and ₹1.5 crore.
Principal Commissioner (PrCIT) and Commissioner (CIT): Can approve waivers or reductions for interest amounts up to ₹50 lakh.
Conditions for relief
For a taxpayer to qualify for a waiver or reduction in interest, three main conditions must be met:
Financial hardship: The interest payment must cause or have caused genuine hardship.
Uncontrollable delay: The delay should have been due to circumstances outside the taxpayer’s control.
Cooperation: The taxpayer must have cooperated fully with the tax assessment or any related proceedings.
Sachin Garg, Partner at Nangia & Co LLP, explained that this move is expected to speed up the processing of waiver or reduction applications, as tax officers now have a clear framework for decision-making.
Rajat Mohan, Senior Partner at AMRG & Associates, highlighted that this structure “increases transparency and efficiency by empowering different levels of tax officials to make quicker, more consistent decisions.”
Harsh Bhuta, Partner at Bhuta Shah & Co, stated “Setting these monetary limits enables officials to manage interest relief cases more effectively, ensuring the right oversight and support for taxpayers facing genuine financial strain.”