Waiver of Interest on Late Deposit of TDS : CIRCULAR NO. 5/2025

By | April 2, 2025
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 WAIVER ON LEVY OF INTEREST UNDER SECTION 201(1A)(ii) OR 206C(7)
CIRCULAR NO. 5/2025 [F.NO. 275/92/2024-IT(BUDGET)] , DATED 28-3-2025 
Section 201(1A) of the Income-tax Act (hereinafter “the Act”) provides for levy of interest on account of failure to deduct or pay the deducted tax to the credit of the Central Government by the deductor. Further, section 206C(7) of the Act provides for levy of interest on account of failure to collect or pay the collected tax to the credit of the Central Government by the collector.
2. Representations have been received by the Central Board of Direct Taxes (hereinafter “the Board”) that while making payments of taxes deducted at source (TDS) and taxes collected at source (TCS) to the credit of the Central Government as per sections 200 and 206C of the Act, the taxpayers have encountered technical glitches. On account of such glitches, while the payment is initiated by the taxpayers/deductors/collectors and the amounts are debited from their bank accounts on or before the due date, the actual credit to the Central Government is done after the due date. In such cases, notices have been received by such taxpayers for levy of interest under section 201(lA)(ii)/206C(7) of the Act, as the case maybe.
3. In exercise of the powers under section 119 of the Act, the Board, hereby directs that the Chief Commissioner of Income-tax (COT) or Director General of Income-tax (DGIT) [or in case there is no CCIT and DGIT, then Principal Chief Commissioner of Income-tax (PrCCIT)] may reduce or waive interest charged under section 201(lA)(ii)/206C(7) of the Act in the class of cases where-
•the payment is initiated by the taxpayers/deductors/collectors and the amounts are debited from their bank accounts on or before the due date, and
•the tax could not be credited to the Central Government, before due date because of technical problems, beyond the control of the taxpayer/deductor/collector.
4. The CCIT or DGIT or PrCCIT, as the case maybe, examining an application for waiver of interest under this order shall pass a speaking order after providing adequate opportunity of being heard to the applicant and after verification of technical glitches from the bank/Directorate of Systems.
5. Even if the interest under section 201(1A)(ii)/206C(7) of the Act has already been paid by the taxpayer, the same can be considered for waiver and a refund maybe given to the deductor. if waiver is ordered.
6. No waiver application shall be entertained beyond one year from the end of the financial year for which the interest under section 201(1A)(ii)/206C(7) of the Act is charged.
7. An application received for waiver of interest under section 201(1A)(ii)/206C(7) of the Act shall be disposed of within a period of six months from the end of the month in which such application is received.
8. The order issued by the CCIT or DGIT or PrCCIT, as the case maybe, shall be final and no petition against that order shall be entertained by the Board.
9. The above will come into effect from the date of issue of this Circular. Hindi version shall follow.
Rubal Singh
Deputy Secretary, IT-Budget
____________________________________________________________
Example

 “Acme Corp,” and needed to pay your TDS for Feb 2025 by March 7, 2025. On March 6, 2025, Acme Corpinitiated the payment through your bank’s online portal, and the ₹50,000 TDS amount was debited from your account immediately. However, due to a temporary issue with the government’s tax payment gateway that day, the credit to the Central Government’s account didn’t happen until March 9, 2025.

Because the payment reached the government after the due date, the Income Tax Department might issue a notice to Acme Corp for interest under section 201(1A)(ii) for the delay.

Now, based on this circular, Acme Corp can do the following:

  1. File an application with the Chief Commissioner of Income-tax (or the relevant authority in their jurisdiction) requesting a waiver of the interest.
  2. Provide evidence along with their application, such as:
    • Bank statement showing the debit of ₹50,000 from their account on March 6, 2025.
    • Details of the technical glitch they encountered (if they have any specific communication from the bank or the tax portal).
  3. The CCIT (or relevant authority) will then likely:
    • Give Acme Corp an opportunity to explain their situation.
    • Verify the technical glitch with Acme Corp’s bank or the Directorate of Systems.
  4. If the CCIT is satisfied that the delay in credit to the government was indeed due to a technical problem beyond Acme Corp’s control, they can pass an order waiving the interest.
  5. If Acme Corp had already paid the interest, the CCIT could order a refund of that amount.

Key takeaway: This circular offers relief to taxpayers who face interest charges on TDS/TCS payments solely due to technical glitches that prevented timely credit to the government, despite the taxpayer initiating the payment on time. It’s a welcome step towards addressing genuine difficulties faced by taxpayers in the digital age.