The Income Tax Department has given approval to the tax authorities to either waive or reduce the interest payable by the taxpayer under specified conditions. Section 220(2A) of the Income Tax Act provides that if a taxpayer fails to pay the amount of tax specified in the demand notice, he is required to pay interest at 1% per month for the period of delay in payment.
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The Act also empowers the Principal Chief Commissioner (PrCCIT), Chief Commissioner (CCIT) Principal Commissioner (PrCIT) or officers of the rank of Commissioner to reduce or waive the amount of interest payable.
The Central Board of Direct Taxes (CBDT), through a circular dated 4th November, has fixed the monetary limit of interest that can be waived or reduced by tax authorities.
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Accordingly, the PrCCIT Rank Officer can decide to reduce or waive interest on an amount exceeding Rs. 10 lakh. For interest above Rs. 50 lakh, the power to waive or reduce interest will lie with the CCIT Rank Officer.
The power to reduce or waive interest to be granted under Section 220(2A) will be subject to fulfilment of three specified conditions — payment of such amount has caused or would cause actual hardship to the assessee; non-payment of interest was due to circumstances beyond the control of the assessee; the assessee has cooperated in investigations relating to the assessment or processing of any recovery due to him.
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Rajat Mohan, Senior Partner, AMRG & Associates said the move would improve transparency and efficiency in granting interest relief. Setting thresholds based on the number of exemptions empowers officials at different levels to make faster decisions, enhance consistency across cases and reduce administrative bottlenecks, he added.
