Last Updated:
The income tax department has allowed tax officials to either waive, reduce interest payable by a taxpayer, subject to conditions
The power of reduction or waiver of the interest payable under Section 220(2A) would be subject to satisfaction of three specified conditions
The income tax department has allowed tax officials to either waive or reduce the interest payable by a taxpayer, subject to specified conditions.
Overview of Section 220 (2A)
Under the Income Tax Act Section 220 (2A), if a taxpayer fails to pay the tax amount specified in any demand notice, he/she is liable to pay interest at 1 per cent per month for the period of delay in making the payment.
Authority to Waive or Reduce Interest
The Act also empowers the Principal Chief Commissioner (PrCCIT) or Chief Commissioner (CCIT) or Principal Commissioner (PrCIT) or Commissioner rank officers to reduce or waive the amount of interest due to be paid.
CBDT Circular on Monetary Threshold
The Central Board of Direct Taxes (CBDT) through a circular dated November 4 has specified the monetary threshold of the interest that can be waived or reduced by the tax officers.
Delegation of Decision-Making
Accordingly, the PrCCIT rank officer can decide on reducing or waiving interest due of over Rs 1.5 crore. For interest due above Rs 50 lakh to Rs 1.5 crore, the CCIT rank officer will decide on the waiver/reduction, while PrCIT or Income Tax Commissioners can decide on interest due up to Rs 50 lakh.
Conditions for Waiver or Reduction
The power of reduction or waiver of the interest payable under Section 220(2A) would be subject to satisfaction of three specified conditions — payment of such amount has caused or would cause genuine hardship to the assessee; default in interest payment was due to circumstances beyond the control of the assessee; the assessee has cooperated in inquiry relating to assessment or proceeding of the recovery of any amount due from him.
Expert Opinions
Nangia & Co LLP Partner Sachin Garg said, “This move of CBDT is expected to facilitate expeditious disposal of applications by a taxpayer for waiver or reduction of interest under section 220. It may be noted that there is no change in the specified conditions that are required to be met for seeking such a reduction or waiver of interest under section 220 of the Act.” A
MRG & Associates Senior Partner Rajat Mohan said this move will promote transparency and efficiency in granting interest relief.
“Based on the waiver amount, it empowers officials at different levels to make quicker decisions, enhancing consistency across cases and reducing administrative bottlenecks,” he added.
