CBDT Eases Rules for Waiving Interest on Delayed TDS/TCS Payments Due to Technical Glitches

The Central Board of Direct Taxes (CBDT) has recently issued Circular No. 5/2025, dated March 28, 2025, addressing taxpayer grievances related to technical glitches that have hindered the timely payment of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). This circular empowers Chief Commissioners or Directors General of Income-tax to waive interest levied under sections 201(1A)(ii) and 206C(7) of the Income-tax Act, 1961, in specific cases where payments were initiated on or before the due date but were delayed due to technical issues beyond the taxpayer’s control.

Understanding TDS and TCS

TDS and TCS are mechanisms implemented by the Indian government to collect taxes at the source of income generation. TDS is deducted by the payer (deductor) from payments made to the payee (deductee) for specified services or goods, ensuring tax collection at the time of the transaction. Conversely, TCS is collected by the seller (collector) from the buyer at the point of sale for certain goods and services. Both TDS and TCS must be deposited with the government within prescribed timelines to avoid penalties and interest charges.

Challenges Faced by Taxpayers

Taxpayers have reported instances where, despite initiating TDS/TCS payments on or before the due date, technical glitches in banking channels or payment gateways have resulted in delays. Such delays have led to the automatic levy of interest under sections 201(1A)(ii) and 206C(7) of the Income-tax Act. Recognizing that these delays were not due to any fault of the taxpayers, the CBDT has taken a proactive step to provide relief.

Provisions of the CBDT Circular

The key highlights of Circular No. 5/2025 are as follows:

1. Authority to Waive Interest: Chief Commissioners or Directors General of Income-tax are authorized to waive interest charged under sections 201(1A)(ii) and 206C(7) if the taxpayer can demonstrate that the payment was initiated on or before the due date but was delayed due to technical issues beyond their control.
2. Applicability to Previously Paid Interest: The waiver is applicable even if the interest has already been paid, potentially leading to refunds for taxpayers who have settled such interest charges.
3. Application Process: Taxpayers seeking a waiver must file an application within one year from the end of the financial year in which the interest was charged. The application should include evidence of timely payment initiation and details of the technical glitch encountered.
4. Processing Timeline: The concerned authority is required to process the waiver application within six months from the end of the month in which the application is received.
5. Finality of Decision: The decision made by the Chief Commissioner or Director General of Income-tax regarding the waiver is final and binding.

Implications for Taxpayers

This initiative by the CBDT offers significant relief to taxpayers who have faced undue interest charges due to factors beyond their control. By acknowledging the impact of technical glitches and providing a mechanism for redressal, the CBDT aims to foster a more taxpayer-friendly environment. Taxpayers are encouraged to maintain detailed records of their payment initiation dates and any technical issues encountered to support their waiver applications effectively.

Steps to Apply for Interest Waiver

To avail of the interest waiver, taxpayers should follow these steps:

1. Document the Issue: Retain records of payment initiation, including timestamps and any error messages or communications from banks or payment gateways indicating technical issues.
2. Prepare the Application: Draft a formal application addressed to the jurisdictional Chief Commissioner or Director General of Income-tax, detailing the circumstances of the delay and referencing Circular No. 5/2025.
3. Attach Supporting Evidence: Include all relevant documents, such as bank statements, screenshots of error messages, and correspondence with financial institutions, to substantiate the claim.
4. Submit Within the Stipulated Timeframe: Ensure that the application is submitted within one year from the end of the financial year in which the interest was charged.
5. Follow Up: Monitor the status of the application and provide any additional information if requested by the tax authorities.

Conclusion

The CBDT’s Circular No. 5/2025 is a commendable step towards addressing genuine hardships faced by taxpayers due to unforeseen technical glitches. By facilitating the waiver of interest in such cases, the CBDT underscores its commitment to fair and equitable tax administration. Taxpayers should proactively utilize this provision to seek relief from unjust interest charges and ensure compliance with the prescribed application procedures.

For detailed information and to access the official circular, taxpayers can refer to the CBDT’s communication dated March 28, 2025.