CBDT clarifies waiver rules for levy of interest

CBDT Clarifies Waiver Rules for levy of Interest Under Section 201(1A)(ii) and 206C(7)

Clarification regarding CBDT’s Circular No. 5/2025 dated 28.03.2025 for waiver on levy of interest under section 201(1A)(ii)/ 206C(7) of the Income-tax Act, 1961, as the case may be, in specific cases

🔍 Background:

Earlier this year, the CBDT issued Circular No. 5/2025 dated 28th March 2025, allowing waiver of interest levied under sections 201(1A)(ii) and 206C(7) of the Income-tax Act, 1961. This waiver applied to specific cases where taxpayers defaulted in depositing tax deducted or collected at source but had a reasonable cause.

Subsequently, field officers sought clarification regarding the effective date of the waiver provisions and the applicability of waiver for past interest demands.

📢 CBDT Clarification via Circular No. 6/2025 (Dated 1st July 2025):

The Central Board of Direct Taxes has now addressed these concerns through Circular No. 6/2025, which clarifies the following points:

✅ Key Clarifications:

1. Authority to Pass Waiver Orders
   The Prescribed Authorities—CCIT, DGIT, or Pr.CCIT—are empowered to issue waiver orders after 28th March 2025, i.e., the date of issuance of Circular 5/2025.
2. Time Limit for Filing Waiver Applications
   As stated earlier in Para 6 of Circular 5/2025, waiver applications can be filed within one year from the end of the financial year for which the interest was charged.
   • Example:
     If interest is levied for FY 2023–24, the application must be submitted on or before 31st March 2025.
3. Waiver for Past Interest Charges Also Allowed
   Waiver applications can be filed even for interest charged before the date of Circular 5/2025, as long as they comply with the above time limit.

📘 What Sections 201(1A)(ii) and 206C(7) Deal With:

• Section 201(1A)(ii): Relates to interest payable when there’s a delay in depositing TDS (Tax Deducted at Source).
• Section 206C(7): Deals with interest in case of default in depositing TCS (Tax Collected at Source).

These provisions typically impose 1% interest per month for delays in remittance of tax.

📌 Implication for Taxpayers and Tax Authorities:

• Taxpayers who had genuine reasons for delay in TDS/TCS deposit can now seek relief from interest even if the interest demand was raised before March 2025.
• The waiver is not automatic—it must be applied for within the prescribed time, and the authority must be satisfied with the merit of the case.

📝 Action Points:

• Review any outstanding interest under sections 201(1A)(ii) or 206C(7).
• If eligible, file an application for waiver before the due date.
• Keep documentation ready to justify the cause of delay.

Conclusion:
CBDT’s clarification opens a significant relief window for deductors and collectors who defaulted on TDS/TCS compliance but had valid reasons. Timely application and proper justification are key to availing this benefit.

Circular No. 8 /2025

Costly ITR Mistakes to Avoid in 2025 (Save Money):
https://www.youtube.com/shorts/xeTgjvfEt6o

Also Read: New Income-tax Bill 2025 Navigator

Also Read:

1. Recommendations of the 55th Meeting of the GST Council
2. Changes in GST and Income Tax during the Financial Year 2024-25
3. TDS and TCS provisions applicable from April 1, 2025
4. Rationalizing TDS: A Deep Dive into Budget 2025’s Proposals

Go To Memorandum

Go To Finance Bill 2025

Read More on Union Budget 2025