CBDT’s New Guidelines for Interest Waiver on Delayed Tax Payments

On November 4, 2024, the Central Board of Direct Taxes (CBDT) issued Circular No. 15/2024, providing a framework for the reduction or waiver of interest on delayed payments of income tax. 

This circular  aims to clarify  the monetary thresholds and specific conditions under which taxpayers may qualify for interest reduction or waiver  under the provisions  Section 220(2A) of the Income-tax Act, 1961 with effect from 04/11/2024( the date of issue of circular)

The key aspects covered in this circular have been discussed in the article.

Background on Section 220(2) and Interest on Delayed Payments

Section 220(2) of the Income-tax Act mandates a 1% simple interest per month or part of a month on delayed tax payments if a taxpayer fails to comply with a demand notice issued under Section 156. This interest is applicable until the tax demand is settled. However, Section 220(2A) grants certain authorities the power to reduce or waive this interest under specific circumstances, provided the taxpayer meets certain conditions.

Key Provisions in Circular No. 15/2024

The  following are the highlights of the circular :-

(1) Authority and Monetary Limits:

The authority to grant a waiver or reduction of interest varies based on the interest under section 220  in question. According to the circular:

• For amounts up to ₹50 lakh, the authority lies with the Principal Commissioner of Income Tax (Pr.CIT) or Commissioner of Income Tax (CIT).
• For amounts above ₹50 lakh and up to ₹1.5 crore,the authority lies wit the Chief Commissioner of Income Tax (CCIT) or Director General of Income Tax (DGIT).
• For amounts exceeding ₹1.5 crore, the power rests with the Principal Chief Commissioner of Income Tax (Pr.CCIT).

(2) Conditions for Interest Waiver: 

To be eligible for a waiver or reduction of interest under this provision, the following conditions needs to  be met:

• Genuine Hardship: The delayed payment should have caused or be likely to cause genuine hardship to the taxpayer.
• Uncontrollable Circumstances: The delay in payment should be due to circumstances beyond the taxpayer’s control.
• Cooperation in Proceedings: The taxpayer must have cooperated with any inquiry related to the assessment or recovery of the outstanding tax amount.

Implications of the Circular for Taxpayers

This circular aims to streamline the process of obtaining interest relief and ensures that genuine cases of financial difficulty are addressed appropriately. Taxpayers facing financial hardship and fulfilling the stipulated conditions can approach the specified authorities for relief within the set monetary limits. These provisions bring clarity and consistency, especially for taxpayers dealing with high interest amounts on delayed payments.

Conclusion

The issuance of Circular No. 15/2024 reflects the CBDT's intent to provide a fair and transparent process for interest waivers, aiding taxpayers who encounter unforeseen financial challenges. By clearly delineating the authority thresholds and conditions for relief, this circular ensures that the process remains both equitable and efficient.

Taxpayers who believe they meet these conditions should reach out to the respective tax authorities to understand their eligibility for interest relief on delayed payments.

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