CBDT Allows Waiver of TDS/TCS Interest Charged Before Circular 5/2025

Circular No. 8/2025, dated 01-07-2025

The Central Board of Direct Taxes (CBDT) has issued a key clarification regarding the waiver of interest levied under Section 201(1A)(ii) and Section 206C(7) of the Income-tax Act, 1961. This pertains to cases involving defaults in the payment of TDS/TCS to the government.

1. Background – Circular No. 5/2025 and Waiver Provisions

Through Circular No. 5/2025, dated 28th March 2025, the CBDT authorised Chief Commissioners of Income-tax (CCIT) and Directors-General of Income-tax (DGIT) to consider reduction or waiver of interest levied under the above provisions. The waiver is subject to fulfillment of prescribed conditions laid down in the said circular.

These provisions typically deal with:

• Section 201(1A)(ii) – Interest for late payment of TDS to the Central Government.
• Section 206C(7) – Interest for late payment of TCS to the Central Government.

2. Request for Clarification – Date of Applicability

After issuance of the circular, field authorities sought clarification on whether the power to waive interest applies only prospectively (i.e., interest charged after the circular date) or also covers interest charged prior to the circular.

The concern revolved around the effective date from which the waiver applications could be considered valid and whether older cases could also be covered under this relief mechanism.

3. CBDT Clarification on Applicability and Time Limits

The CBDT has now clarified the following:

1. Effective Date for Waiver Authority – The power to pass waiver or reduction orders under Circular No. 5/2025 becomes operative from the date of the circular’s issuance, i.e., 28-03-2025.
2. Retrospective Coverage – Waiver applications can also be entertained for interest charged prior to the issuance of Circular No. 5/2025. This clarification allows for relief even in past cases, subject to compliance with the procedural conditions.
3. Time Limit for Filing Applications – Waiver applications must be submitted within one year from the end of the financial year for which the interest has been charged.

For example – If the interest pertains to FY 2023-24, the application for waiver must be filed on or before 31-03-2025.

4. Implications for Taxpayers and TDS/TCS Deductors

This clarification is a significant relief for taxpayers and deductors who were facing interest charges for delays in depositing TDS/TCS, especially in genuine hardship or procedural delay cases.

Key takeaways include:

• Timely filing of waiver applications is crucial.
• Even interest charged prior to 28-03-2025 may qualify for relief, offering retrospective benefit.
• Waiver is not automatic and is subject to the satisfaction of conditions laid down in the circular.

Click Here To Read The Full Circular