Income Tax Department issued a circular on November 4 that outlines the monetary limits for waivers or reductions based on the rank of the tax official.
According to new guidelines released by the Income Tax Department, if certain requirements are fulfilled, tax officials may waive or lower the interest that taxpayers owe on past-due payments.
The goal of this change is to expedite the relief process, particularly for taxpayers who are struggling financially.
Income Tax law
Taxpayers who fail to pay a demand notice amount by the due date are subject to a 1% monthly interest charge under Section 220(2A) of the Income Tax Act.
However, if certain conditions are met, senior tax officials may occasionally authorize a remission or decrease of this interest.
Power to approve waivers or reductions?
On November 4, the Central Board of Direct Taxes (CBDT) published a circular stating the maximum amounts for waivers or reductions according to the tax official’s rank:
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The Principal Chief Commissioner (PrCCIT) has the authority to waive or reduce interest payments that exceed ₹1.5 crore. The Chief Commissioner (CCIT) has the authority to manage interest reductions or waivers for amounts ranging from ₹50 lakh to ₹1.5 crore. Commissioner (CIT) and Principal Commissioner (PrCIT): Have the authority to provide waivers or reductions for interest payments up to ₹50 lakh.
Conditions for relief
Taxpayer to qualify for a waiver or reduction in interest, three main conditions must be met:
- Financial hardship: The interest payment must cause or have caused genuine hardship.
- Uncontrollable delay: The delay should have been due to circumstances outside the taxpayer’s control.
- Cooperation: The taxpayer must have cooperated fully with the tax assessment or any related proceedings.
A recent change is expected to expedite the processing of waiver or reduction applications, as tax officers now have a clear framework for decision-making. This new structure enhances transparency and efficiency by empowering various levels of tax officials to make quicker and more consistent decisions. Additionally, establishing monetary limits allows officials to manage interest relief cases more effectively, ensuring proper oversight and support for taxpayers experiencing genuine financial difficulties.
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