The Income Tax Department has allowed tax officers to waive or reduce the interest payable by the taxpayer subject to specified conditions.
Under Section 220(2A) of the Income Tax Act, if a taxpayer fails to pay the amount of tax specified in a demand notice, he is required to pay interest at the rate of one per cent per month for the period of delay in making the payment.
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 payable.
The Central Board of Direct Taxes (CBDT) through a circular issued on November 4 has specified the monetary limit of interest that tax authorities can waive or reduce.
Accordingly, a PRCIT rank officer can decide to reduce or waive the outstanding interest of more than Rs 1.5 crore. For outstanding interest from Rs 50 lakh to Rs 1.5 crore, a CCIT rank officer will decide on exemption/deduction, while a PRCIT or Income Tax Commissioner can decide on outstanding interest up to Rs 50 lakh.
On the other hand, under section 220(2A), the interest payable can be reduced or waived if three specified conditions are fulfilled. These conditions are, the payment of such amount has caused or would cause genuine hardship to the taxpayer; the default in paying interest was due to circumstances beyond the control of the taxpayer; the taxpayer has cooperated in the investigation related to the tax assessment or in the proceedings for the recovery of any amount due from him.
Nangia & Co LLP Partner Sachin Garg said, “This move by the CBDT is expected to help in speedy disposal of applications made by taxpayers for waiver or reduction of interest under section 220. It is worth noting that there is no change in the specified conditions that are required to be fulfilled for seeking such reduction or waiver of interest under section 220 of the Act.”
AMRG & Associates senior partner Rajat Mohan said the move would promote transparency and efficiency in providing interest relief.
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