Big Relief – Circular No. 05/2025: Waiver of Interest on TDS/TCS under the Income-tax Act

Date of Issue: March 28, 2025
Issued by: Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes

---

Subject: Order under Section 119 of the Income-tax Act, 1961 for Waiver on Levy of Interest under Section 201(IA)(ii) / 206C(7) of the Act in Specific Cases

Introduction

In an important directive, the Central Board of Direct Taxes (CBDT) has issued a circular that addresses issues surrounding the levy of interest on taxpayers and collectors who face difficulties in paying taxes deducted at source (TDS) and taxes collected at source (TCS). The directive aims to relieve taxpayers of undue financial strain due to technical glitches in the payment systems.

Background

Section 201(IA) of the Income-tax Act stipulates the imposition of interest when deductors fail to deduct or timely remit tax to the credit of the Central Government. Similarly, Section 206C(7) pertains to the interest charged for failure to collect or remit tax at the source. Recognizing the challenges faced by taxpayers, especially in light of recent technical issues, the Board has acted to provide relief.

Key Issues Raised

Taxpayers have reported experiencing technical glitches while making payments of TDS and TCS. These glitches have led to situations where payments are debited from the taxpayer’s account on or before the due date, but the actual credit to the Central Government occurs post due date. Consequently, many taxpayers have received notices related to the levying of interest under the aforementioned sections.

The Waiver Directive

In response to the challenges, the CBDT has issued the following directives:

1. Waiver of Interest: Chief Commissioners of Income-tax (CCIT) or Directors General of Income-tax (DGIT) are empowered to reduce or waive the interest charged under Sections 201(IA)(ii) and 206C(7) when:
   • The payment was initiated on time by the taxpayer/deductor/collector.
   • The failure to credit the tax to the Government was due to technical glitches beyond the taxpayer’s control.
2. Application Process:
   • CCIT or DGIT must pass a speaking order after giving the applicant a chance to be heard.
   • Verification of technical issues should be conducted with banks or the Directorate of Systems.
3. Refund Consideration: If taxpayers have already paid the interest that can be waived, they may apply for a refund should the waiver be granted.
4. Timelines:
   • Applications for waivers must be made within one year from the end of the financial year in which interest was charged.
   • Such applications shall be adjudicated within six months from the month in which they are received.
5. Finality of Decisions: The decisions made by CCIT, DGIT, or Principal CCIT regarding waivers are final and not subject to appeal or petition.

Implementation

This order comes into effect immediately upon the circular’s issuance, further facilitating better compliance and easing the tax burden on taxpayers experiencing difficulties. The Hindi version of this circular will be issued to ensure accessibility to all stakeholders.

Conclusion

This circular from the CBDT reflects the government’s commitment to addressing taxpayer concerns and ensuring that compliance with tax obligations does not lead to undue financial strain due to operational challenges. Taxpayers who find themselves affected by technical issues are encouraged to familiarize themselves with this directive and take appropriate action for a potential waiver of interest.

circular-no-5-2025.pdf