📢 CBDT Clarity on Waiver of Interest Under Income‑Tax Act Sections 201(1A)(ii)/206C(7) — New Policy Update (Dated: July 2, 2025)
🧾 Background: Revisiting Circular 5/2025
Earlier this year, the CBDT issued Circular No. 5/2025 (March 28, 2025), authorizing certain tax officers to waive interest levied under:
- Section 201(1A)(ii) – dealing with interest on tax deducted at source (TDS) not deposited by deductors
- Section 206C(7) – covering interest on tax collected at source (TCS) not deposited by collectors
★ What was missing?
However, the circular’s scope raised questions about:
- When the waiver authority becomes active — is it retroactive or applicable only for interest charged after March 28?
- Whether interest levied before March 28 qualifies for waiver.
✅ CBDT’s Clarification in Circular 08/2025
To resolve field officer confusion, the CBDT issued Circular No. 08/2025 on July 1, 2025, confirming:
- Effective Authority Date
The prescribed authority — CCIT, DGIT, or Pr. CCIT — is empowered to pass waiver orders as soon as the circular is issued, not retroactively from March 28. They may consider applications filed today. - Time-Limit for Submissions
Waiver applications are considered valid if filed within ONE YEAR of the end of the relevant financial year.- Example: For interest charged in FY 2023–24, applications can be submitted until 31 March 2025.
- Retroactive Eligibility
Even interest charged before the March 28 circular can be waived, provided the application meets the one-year deadline.
📘 Practical Implications for Taxpayers and Field Officials
- Tax Deductors/Collectors
Those who earlier paid interest under Section 201(1A)(ii) or 206C(7) may now apply for waivers — even if the payment was before March 28 — if submitted within the stipulated time. - Tax Officials
Field authorities are now unequivocally allowed to process these waiver applications. The confusion about retroactive authority has been removed, enabling greater flexibility within the system. - Tax Administration
The circular strengthens taxpayer relief measures, underlining CBDT’s commitment to fair enforcement while aligning with statutory timelines.
💼 Why This Is Big News
- Greater Relief for Returnees
Entities dinged in FY 2023–24 for delayed TDS/TCS payments can now apply for waiver — even post-circular payment. - Procedure Simplification
No more bureaucratic hurdles about “interest charged after XXX date.” Simpler processing and processing timelines now apply. - Improved Taxpayer Trust
Demonstrates CBDT’s willingness to ease compliance burdens, especially during economic vulnerabilities. - Clear Compliance Deadlines
Sheds light on the March 31, 2025 deadline for FY 2023–24 cases, helping taxpayers prioritize applications properly. - Legal Certainty
Official clarification wards off litigation uncertainty and overcomes past ambiguity experienced by CRA professionals and field authorities.
📌 What Taxpayers Should Do Next
- Evaluate If Interest Was Charged
- Under 201(1A)(ii) (TDS defaults) or 206C(7) (TCS defaults) in FY 2023–24 or before.
- Check Application Eligibility
- Ensure the interest was charged and paid on or before March 28, but within the one-year window that ends March 31, 2025.
- Prepare Waiver Applications
- Include all necessary documents, payment receipts, and a letter citing Circulars 5/2025 & 8/2025.
- Timely Submission
- File with CCIT/DGIT/Pr. CCIT before the one-year deadline.
- Follow Up with Tax Authorities
- Ensure compliance during processing and clear submission of any additional papers requested.
✍️Key Tax Terms
- Section 201(1A)(ii): Interest leviable when TDS is deducted by the payer but not deposited with the government.
- Section 206C(7): Concerns TCS collectors retaining tax but failing to remit it, leading to interest charges.
- CCIT / DGIT / Pr. CCIT: High-ranking Income-tax authorities empowered to decide on waivers.
- Waiver Application: Formal request submitted to the prescribed authority asking for relief from interest charges.
- Circular No. 5/2025: Laid the groundwork for waivers; needed further clarification on timing.
- Circular No. 08/2025: Now clarifies that waivers are permissible for pre-circular interest and defines the authority’s effective date.
📎 Suggested Application Checklist
| Checklist Item | Reminder |
|---|---|
| Interest charged under Sec. 201(1A)(ii) or 206C(7)? | Yes ✅ / No ❌ |
| Charge pertains to FY 2023–24 or earlier? | Required for waiver eligibility |
| Interest paid before March 28, 2025? | Still eligible if within time window |
| Documentation ready? (invoices, payment challans, TDS/TCS) | Essential for waiver application |
| Citing Circular Nos. 5/2025 & 8/2025? | Must align with CBDT’s clarification |
| Submitted before one-year deadline from FY-end? | Not later than 31 March 2025 |
| Sent to correct approving authority | CCIT/DGIT/Pr. CCIT |
🔮 Forward Outlook & Strategic Guidance
- Continue to monitor CBDT channels for further guidance or extension notices.
- Tax practitioners should incorporate this timeline into audit and compliance checklists for FY 2023–24 and FY 2024–25.
- Even interest paid in FY 2022–23 may be eligible—provided filed before March 31, 2024.
- Ensure clients and internal teams are educated on this change to avoid missed opportunities.
- Budget for experienced legal support for drafting persuasive waiver petitions citing policy intent.
🚨 Conclusion
The CBDT’s July 1, 2025 Circular No. 08/2025 is a crucial update, dispelling confusion caused by Circular No. 5/2025. It allows waiver of interest under Sections 201(1A)(ii) and 206C(7) even for amounts paid before March 28, 2025, provided the application is filed within one year of the financial year’s end.
The Central Board of Direct Taxes (CBDT) has issued Circular No. 08/2025, which brings clarity over its earlier Circular No. 5/2025 (dated March 28, 2025) about the waiver of interest under Sections 201(1A)(ii) and 206C(7) of the Income‑tax Act, 1961. The updated guidance confirms:
Interpreting deadlines accurately, organizing documentation, and submitting timely requests can offer significant financial relief to taxpayers and businesses alike.
🔍 Summary at a Glance
- The waiver authority (CCIT/DGIT/Pr. CCIT) can act after the issue of the circular.
- Applications must be filed within one year from the end of the relevant financial year.
- Waivers can now be granted even for interest charged prior to the public release of Circular No. 5/2025, as long as the time‐limit criteria are satisfied.
