CBDT sets monetary limits for waiver of interest

An announcement dated November 4 states that a Principal Chief Commissioner of Income Tax (PrCCIT) has the authority to consider reducing or exempting interest amounts exceeding Rs 1.5 crore.

An official statement announced that tax officers are now authorized by the Central Board of Direct Taxes (CBDT) to lessen or eliminate the interest due on tax payments from taxpayers, provided certain conditions are met.

A circular dated November 4 states that Principal Chief Commissioners of Income Tax (PrCCIT) have the authority to lower or exempt interest amounts exceeding Rs 1.5 crore. In cases where the interest due ranges between Rs 50 lakh and Rs 1.5 crore, officers holding the rank of Chief Commissioners of Income Tax (CCIT) will be responsible for determining the reduction or waiver. Additionally, for interest amounts up to Rs 50 lakh, the decision-making authority lies with Principal Commissioners of Income Tax (PrCIT) or Income Tax Commissioners.

In accordance with Section 220 (2A) of the Income Tax (I-T) Act, individuals who do not remit the specified tax amount mentioned in a demand notice are subject to an interest rate of 1% per month for the duration of the delay in settlement. Furthermore, the legislation authorizes the designated officers to potentially lessen or exempt the accruing interest.

Based on the circular, the exemption or decrease in the interest due must meet three specific criteria – the payment in question has or would result in real financial difficulty for the taxpayer; the failure to pay interest was a result of factors outside the taxpayer’s control; the taxpayer has actively participated in investigations related to assessment or the recovery process of any outstanding amounts.

According to executive partner S Vasudevan from Lakshmikumaran & Sridharan, the establishment of monetary thresholds aims to enhance the efficiency of various authorities’ decision-making processes.

Sachin Garg, a partner at Nangia & Co, highlighted that this decision is anticipated to streamline the process of handling requests from taxpayers seeking a reduction or waiver of interest. He emphasized that the prescribed conditions for requesting such adjustments under section 220 of the Act remain unchanged.