The Income Tax Department, through Circular No. 5/2025, dated 28th March ’25, has introduced a waiver mechanism for certain interest liabilities related to TDS / TCS.
Interest Waiver Provision: The circular provides guidelines for waiving interest charges that are typically levied under:
- Section 201(1A): Pertains to interest for failure to deduct tax at source (TDS) or after deduction, failure to pay the tax to the government.
- Section 206C(7): Relates to interest for failure to collect tax at source (TCS) or after collection, failure to pay it to the government.
Applicability: The waiver is applicable in specific cases where:
- The taxpayer can demonstrate that the failure to deduct/collect or remit TDS / TCS was due to genuine hardship or circumstances beyond their control.
- The taxpayer has rectified the default by subsequently deducting / collecting and depositing the due taxes.
Procedure for Waiver:
- Application: Taxpayers seeking a waiver must submit a detailed application to the jurisdictional assessing officer, outlining the reasons for the default and the steps taken to correct it.
- Assessment: The assessing officer will evaluate the merits of each case, considering factors such as the nature of the default, reasons provided, and the taxpayer’s compliance history.
- Approval: If satisfied, the assessing officer may recommend the waiver, which will then be subject to approval by higher tax authorities as specified in the circular.
Limitations:
- The circular specifies that the waiver is not automatic and will be granted only in cases where genuine hardship is established.
- Cases involving willful neglect or tax evasion are not eligible for the waiver.
Objective:
This measure aims to provide relief to taxpayers who have encountered genuine difficulties in complying with TDS / TCS provisions, thereby promoting voluntary compliance and reducing unnecessary litigation.
Download the Official Circular:
To read the full details of Circular No. 5/2025, dated 28th March 2025, you can download the official document from the following link:
Download Circular Document