Big Relief from CBDT! Now You Can Get Interest Waiver on TDS/TCS Defaults

The Central Board of Direct Taxes (CBDT) has issued a circular (No. 8/2025) dated July 01, 2025, regarding the clarification of its previous circular (No. 5/2025) dated March 03, 2025, which permits waiver of interest charged under sections 201(1A)(ii) and 206C(7) of the Income-tax Act, 1961.

These aforementioned sections require deductors of tax to pay interest on the tax that was either not deducted or not paid to the government on time. However, under certain conditions, the government may cancel this interest partially or fully.

After the circular was issued, numerous income tax field officers raised questions regarding:

• From what date can the authority begin passing waiver orders?
• Are the waiver applications only for interest charged on or after the date the circular was issued, i.e., March 28, 2025?
• Can waiver applications be entertained for older cases, where interest was charged before this circular was issued?

In order to answer the above questions, CBDT issued another circular (No. 8/2025) in July 2025, clarifying the following:

1. Authority to Waive Interest (Para 2(i)):

The departments authorised to grant waivers [Chief Commissioner of Income Tax (CCIT), Director General of Income Tax (DGIT), or Principal Chief Commissioner of Income Tax (Pr. CCIT), etc.] can begin passing waiver orders from the date the original Circular No. 5/2025 was issued, i.e., March 28, 2025.

2. Due Date to File Waiver Application (Para 2(ii)):

The waiver application for interest is required to be filed within the period of one year from the end of the financial year in which the interest was applied. For example, if interest was applied for the financial year 2023-24, then the application is required to be submitted by the end of the financial year (March 31, 2025).

This rule facilitates determining the time limit to file an application. It does not depend on the issue date of the circular, but depends on the financial year to which the interest belongs.

3. Waiver Permitted for Past Cases Too (Para 2(iii)):

This issued circular had made it very clear that waiver applications can also be accepted for interest u/s 201(1A)(ii)/206C(7) of the Act charged even before the issue date of Circular No. 5/2025, as long as the application is filed within the one-year time limit as described above.