The CDBT on 28th March 2025 has issued Circular 05/2025 for waiver of on levy of interest under section 201(IA)(ii)/ 206C(7) of the Act, as the case maybe, in specific cases
What is Section 201(1A)
Section 201(1A) of the Income Tax Act levies interest on the assessees
- who fails to deduct Tax Deducted at Source (TDS), and
- who has collected the TDS but has failed to pay the same on or before the due date for payment.
Rate of Interest as per Sub-section 1A of Section 201
If any person does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required , such person shall be liable to pay simple interest,—
(i) at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and
(ii) at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid,
and such interest shall be paid before furnishing of the statement (TDS/TCS returns) in accordance with the provisions of Section 200(3).
What is Section 206C(7)
Section 206C(7) of the Income Tax levies interest on the taxpayers who are required to collect tax or who have collected the tax but has failed to remit the same before the due date for payment at the rate of one per cent per month or part thereof on the amount of such tax from the date on which such tax was collectible to the date on which the tax was actually paid and such interest shall be paid before furnishing of the returns.
Analysis of the Circular
As per the Circular issued by the CDBT interest on late payment of TDS or TCS can be waived if the taxpayer has initiated the payment before the due date of payment of the TDS or TCS amount but the actual credit of the amount to the Central Government is done after the due date for payment of TDS or TCS.
In accordance with the powers conferred under section 119 of the Income Tax Act, the CBDT directs the Chief Commissioner of Income-tax (CCIT) or Director General of Income-tax (DGIT) [or in case there is no CCIT and DGIT, then Principal Chief Commissioner of Income-tax (PrCCIT) may reduce or waive interest charged under section 201(lA)(ii) / 206C(7) of the Act in the following cases:
- the payment is initiated by the taxpayers/ deductorsl 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 application of waiver of interest should be submitted within one year from the end of the financial year for which the interest has been charged. The applications received with regard to the waiver shall be disposed within a period of Six months from the end of the month in which the application is received.
Even if the taxpayer has paid the interest under section 206(1A)(ii) or section 206C(7), an application can be made to the CCIT or DGIT for waiver of interest and refund can be obtained by the taxpayer, if ordered for waiver of interest.
The orders filed by the CCIT or DGIT or PrCCIT shall be considered as the final order and further petitions with regard to the same will not be entertained.
The official copy of the circular is attached hereunder for your ready reference:
circular-no-5-2025
