CBDT Clarifies Interest Waiver Under Section 201 and 206C
Understand the latest CBDT circular on waiver of interest for TDS/TCS defaults due to court rulings or retrospective changes.
What’s the CBDT Interest Waiver Circular About?
In a welcome move, the Central Board of Direct Taxes (CBDT) has issued Circular No. 7/2024 dated 25 June 2024, clarifying interest waiver under Section 201(1A)(ii) and Section 206C(7) of the Income-tax Act.
This move offers clarity to taxpayers who defaulted in TDS or TCS payment due to genuine interpretational issues, court decisions, or retrospective amendments. The circular lays down the conditions under which interest may be waived, thereby reducing the compliance burden in eligible cases.
🔗 Read Official Circular on incometaxindia.gov.in
Key Highlights of CBDT Circular 7/2024
- Applies to:
- Taxpayers in default for TDS under Section 201(1A)(ii)
- Taxpayers in default for TCS under Section 206C(7)
- Applicable Period:
- Defaults arising before 01.07.2012
- Eligibility:
- Where TDS/TCS was not deducted/collected due to a bona fide belief, judicial ruling, or retrospective law change
- Taxpayer must have paid principal TDS/TCS voluntarily before detection by the Assessing Officer
- Key Conditions:
- No concealment or misreporting
- Principal amount already deposited
- Application for waiver must be made to the Principal Commissioner/Commissioner of Income-tax
What is Section 201(1A)(ii) and Section 206C(7)?
| Section | Applicability | Interest Rate | Description |
|---|---|---|---|
| 201(1A)(ii) | TDS defaults | 1% p.m. | Interest if tax not deducted/paid |
| 206C(7) | TCS defaults | 1% p.m. | Interest on failure to collect/deposit TCS |
Earlier, taxpayers had no relief from interest even if the default was due to legal ambiguity. This circular bridges that gap.
How to Apply for CBDT Interest Waiver
- Prepare Application
- Addressed to Principal CIT/CIT
- Include reasons for default and attach judicial rulings or clarifications
- Attach Proofs
- Payment challans of principal TDS/TCS
- Copy of order, if any, showing no concealment
- Timeline
- No specific deadline given, but file early to avoid further interest liability
Expert View: Takeaway for Taxpayers
“CBDT’s clarification offers relief for historical TDS/TCS issues, especially where the law was unclear. Ensure your case has no misreporting and back it with legal proof before filing for waiver.”
— S. Damacherla, Tax Consultant at Efiletax
Why This Matters
This CBDT interest waiver allows taxpayers to resolve past defaults without fear of harsh interest penalties — provided the lapse occurred in good faith. It can save lakhs for companies dealing with old TDS disputes or reclassified transactions.
Summary
CBDT has clarified interest waiver under Sections 201(1A)(ii) and 206C(7) for TDS/TCS defaults before 01.07.2012, provided the lapse was due to bona fide belief, judicial ruling, or retrospective amendment and principal tax was paid voluntarily.
FAQ – CBDT Interest Waiver
Q1. Is this waiver automatic?
No. You must file a written application to the relevant Principal CIT or CIT.
Q2. Can I apply if my TDS default was after 01.07.2012?
No. This circular is applicable only for defaults before 01.07.2012.
Q3. Will penalty or prosecution also be waived?
This circular deals only with interest waiver, not with penalties or prosecution.
Q4. Does this apply to cases under appeal?
If the issue is sub judice, consult your tax advisor before filing for waiver.
Final Thoughts: Don’t Miss This Opportunity
If your business had a TDS/TCS issue before 2012 due to unclear law or court rulings, this CBDT interest waiver is your chance to close the matter without incurring interest.
👉 Need help applying? Contact Efiletax GST & TDS experts now to file your waiver request professionally.