The Central Board of Direct Taxes (CBDT) has issued Circular No. 08/2025, dated July 1, 2025, providing much-needed clarity on the waiver of interest levied under Sections 201(1A)(ii) and 206C(7) of the Income Tax Act, 1961. This circular addresses the concerns raised by tax officers regarding the applicability and timelines of interest exemption, as initially discussed in CBDT Circular No. 5/2025, dated March 28, 2025.
Key Highlights of Circular No. 08/2025
✅ Authority to Grant Interest Waiver
The CBDT has confirmed that the designated authorities empowered to process applications for interest exemption are:
- Chief Commissioners of Income Tax (CCIT)
- Director Generals of Income Tax (DGIT)
- Principal Chief Commissioners of Income Tax (Pr.CCIT)
These authorities can consider exemption applications for interest liabilities arising under the aforementioned sections, effective from the date of Circular No. 5/2025, i.e., March 28, 2025.
Timeline for Filing Interest Exemption Applications
To avail the benefit of interest waiver, taxpayers or deductors must adhere to the prescribed timeline:
- Applications must be filed within one year from the end of the financial year in which the interest was levied.
- For example, if the interest pertains to FY 2023-24, the last date to file the exemption application is March 31, 2025.
Notably, even for interest levied before March 28, 2025, exemption applications can be submitted, provided they meet the one-year filing window.
Who Can Benefit?
This move provides significant relief to:
✔️ Taxpayers who have defaulted on TDS (Tax Deducted at Source) or TCS (Tax Collected at Source) obligations.
✔️ Deductors facing interest liabilities under Sections 201(1A)(ii) and 206C(7).
The waiver simplifies the compliance burden and streamlines the process for eligible applicants seeking relief from interest levies.
Positive Industry Response
Tax professionals, chartered accountants, and industry bodies have welcomed this clarification, stating that it addresses ambiguities and ensures a consistent interpretation across tax jurisdictions. It reflects the government’s commitment to simplifying tax compliance and reducing unnecessary litigation.
Conclusion
With Circular No. 08/2025, the CBDT has provided much-needed clarity and relief concerning interest levies under the Income Tax Act. Eligible taxpayers are advised to carefully review their cases and file exemption applications within the stipulated timeline to benefit from this relaxation.
Circular No.8/2025
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