income tax

CBDT Circular: Waiver of TDS/TCS Interest Penalties for Taxpayers

Introduction

The Central Board of Direct Taxes (CBDT) has issued a circular to address taxpayer concerns regarding technical issues that have impacted the timely payment of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). This clarification allows Chief Commissioners or Directors General of Income-tax to waive interest penalties under sections 201(1A)(ii) and 206C(7) of the Income-tax Act for specific cases.

Waiver of Interest Under Specific Circumstances

Taxpayers may find themselves in a situation where payments are initiated before the due date, but due to technical glitches, the credit to the Central Government is delayed. The CBDT’s new directive states that interest penalties may be waived if:

  • Payments were initiated by taxpayers/deductors/collectors and debited from their bank accounts on or before the due date.
  • Credit to the Central Government occurred after the due date due to issues beyond the taxpayer's control.

This provision also applies even if the interest has already been paid, potentially resulting in refunds for the affected taxpayers.

Application Process for Waivers

To qualify for a waiver, applications must be submitted within one year from the end of the financial year in which the interest was levied. The process includes:

  • Providing the taxpayer with an opportunity to present their case.
  • Verifying the technical issues with relevant banks or the Directorate of Systems.

The Chief Commissioner of Income-tax (CCIT) or Director General of Income-tax (DGIT)—or in their absence, the Principal Chief Commissioner of Income-tax (PrCCIT)—will review waiver requests and make a decision.

Processing Timelines and Finality of Orders

The CBDT mandates that applications for waivers be resolved within six months from the end of the month in which the application was received. Additionally, the decision made by the CCIT, DGIT, or PrCCIT will be final, and no further petitions will be accepted by the Board regarding these orders.

Conclusion

This directive from the CBDT marks an important step in addressing taxpayer grievances related to technical difficulties in TDS/TCS payments. It enables affected taxpayers to seek relief from undue interest penalties, thereby ensuring compliance while acknowledging the constraints imposed by technical issues. The circular will take effect immediately upon issuance, with a Hindi version to be provided subsequently.

Additional Notes

This circular is also communicated to various stakeholders, including:

  1. The Chairman & Members, CBDT
  2. All Principal Chief Commissioners of Income Tax and Chief Commissioners of Income Tax/Directors General of Income Tax.
  3. Joint Secretaries, CBDT.
  4. Commissioner of Income-tax (Media & Transfer Pricing).
  5. Database Cell for website updates.
  6. Chambers of Commerce and other relevant organizations.

This streamlined response aims to clarify obligations and provide reasonable recourse in cases where taxpayers have faced technical disruptions.