CBDT Clarifies Interest Waiver Rules Under Sections 201(1A)(ii) and 206C(7) with Circular 8/2025

The Central Board of Direct Taxes (CBDT), via Circular No. 8/2025 issued on 1st July 2025, has clarified the procedure and applicability of interest waivers under sections 201(1A)(ii) and 206C(7) of the Income-tax Act, 1961, in response to queries on Circular No. 5/2025.

It empowers designated authorities (CCITs, DGITs, Pr.CCITs) to approve interest waiver applications filed after March 28, 2025, and allows such applications to be submitted within one year from the end of the relevant financial year.

Importantly, this waiver can also be applied retrospectively for interest charged before Circular No. 5/2025, provided the application meets the one-year deadline.

CBDT Clarifies Interest Waiver Rules for Taxpayers

The Central Board of Direct Taxes (CBDT) has issued an important clarification regarding the waiver of interest under sections 201(1A)(ii) and 206C(7) of the Income-tax Act, 1961. This clarification, outlined in Circular No. 8/2025, addresses representations received from field authorities concerning the implementation of an earlier circular, Circular No. 5/2025, dated March 28, 2025.

The new circular, dated July 2025, from North Block, New Delhi, aims to provide clarity on the effective date for the authority empowered to grant these waivers and the applicability of waiver applications.

Key clarifications from Circular No. 8/2025 are:

• Empowerment of Authority: The prescribed authorities, specifically the Chief Commissioners of Income-tax (CCIT), Directors General of Income-tax (DGIT), and Principal Chief Commissioners of Income-tax (Pr.CCIT), are empowered to pass orders for interest waivers after the date of issuance of Circular No. 5/2025.
• Application Timelines: Applications for the waiver of interest can be entertained within one year from the end of the financial year for which the interest was charged. For instance, if interest was charged for the Financial Year 2023-24, the application for its waiver could be filed by March 31, 2025.
• Retrospective Applicability: Crucially, the CBDT has clarified that waiver applications can be entertained even for interest charged under sections 201(1A)(ii) and 206C(7) before the issuance of Circular No. 5/2025, provided they adhere to the one-year application timeline.

This clarification (F. No. 275/92/2024-IT (B)) comes from the Ministry of Finance, Department of Revenue, and the Central Board of Direct Taxes. It was signed by Rubal Singh, Deputy Secretary, IT-Budget, CBDT.

FAQs on Clarification on the waiver of interest

What is CBDT Circular No. 8/2025 about?
It provides clarification on the waiver of interest under sections 201(1A)(ii) and 206C(7) of the Income-tax Act, 1961, addressing issues raised on Circular No. 5/2025.

Which sections of the Income-tax Act does this circular relate to?
It pertains to sections 201(1A)(ii) and 206C(7), which deal with interest payable on failure to deduct or collect tax at source.

Who is empowered to grant interest waivers as per Circular 8/2025?
The Chief Commissioners of Income-tax (CCIT), Directors General of Income-tax (DGIT), and Principal Chief Commissioners of Income-tax (Pr.CCIT) are authorized to grant waivers.

From when are these authorities empowered to pass waiver orders?
They can pass orders for interest waivers only after the issuance of Circular No. 5/2025, dated March 28, 2025.

What is the deadline for filing an interest waiver application?
Applications must be filed within one year from the end of the financial year for which interest was charged.

Can interest waivers be applied retrospectively?
Yes, the CBDT allows waiver applications for interest charged even before March 28, 2025, as long as they are filed within the one-year deadline.

Is Circular 8/2025 a response to field-level queries?
Yes, it addresses representations from field authorities regarding the implementation of Circular 5/2025.

What is the significance of Circular No. 5/2025?
Circular 5/2025 originally outlined the framework for waiving interest under the relevant sections, which Circular 8/2025 now clarifies further.

Who signed Circular 8/2025?
Rubal Singh, Deputy Secretary, IT-Budget, CBDT, signed the circular.

Where was the circular issued from?
It was issued from North Block, New Delhi, by the Ministry of Finance, Department of Revenue.

What is the reference file number of this circular?
The file number is F. No. 275/92/2024-IT (B).

Can an assessee apply for waiver of interest charged in FY 2023–24?
Yes, provided the application is submitted by March 31, 2025.

Does the circular mention any format for waiver applications?
No, the circular focuses on timelines and authority but does not prescribe a specific format.

Is the clarification legally binding?
Yes, as it is issued by the CBDT under its statutory powers, it is binding on the income-tax authorities.

Can lower-level income-tax officers grant such waivers?
No, only the designated senior authorities—CCIT, DGIT, and Pr.CCIT—are empowered to grant waivers.

What happens if an application is filed after the one-year deadline?
Such applications are likely to be rejected, as they do not comply with the prescribed timeframe.

Is there any fee prescribed for filing a waiver application?
The circular does not mention any fee for filing an interest waiver application.

Are the waivers automatic upon application?
No, they are subject to examination and approval by the empowered authority.

Does the circular apply to both TDS and TCS defaults?
Yes, it applies to interest charged under both TDS (Section 201) and TCS (Section 206C).

What is the purpose of this clarification?
To remove ambiguity around timelines and authority regarding the waiver of interest on TDS/TCS defaults.