The Central Board of Direct Taxes (CBDT) has issued Circular No. 8/2025 dated 01.07.2025, providing much-needed clarity on the applicability of interest waivers under Sections 201(1A)(ii) and 206C(7) of the Income-tax Act. This clarification addresses doubts raised after the issuance of Circular No. 5/2025, dated 28.03.2025.
Background:
Circular 5/2025 empowered Chief Commissioners of Income-tax (CCIT), Principal CCITs, and Directors General of Income-tax (DGIT) to reduce or waive interest in specific cases, provided the taxpayer satisfies certain conditions. However, field officers and stakeholders raised an important question:
Can waiver applications be considered for interest that was charged prior to the issuance of Circular 5/2025?
Key Clarification from CBDT (Circular 8/2025):
CBDT has now confirmed that:
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Competent authorities can issue waiver orders even if the interest pertains to a period prior to 28.03.2025 (the date of Circular 5/2025).
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Taxpayers are eligible to submit waiver applications for such past periods.
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The application must be made within one year from the end of the financial year to which the interest relates.
Example:
If interest pertains to FY 2023–24, the waiver application can be filed up to 31.03.2025.
Implication:
This clarification is a significant relief for taxpayers, particularly TDS/TCS deductors and collectors, who faced legacy interest demands due to late deduction or deposit. It opens the door for reconsideration of old cases where genuine hardship existed.
Action Point for Professionals:
Tax professionals, CFOs, and compliance heads should revisit historical TDS/TCS defaults to assess eligibility for waiver under Sections 201(1A)(ii) and 206C(7). The expanded relief window could help reduce financial liabilities and close long-pending disputes.
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