Section 220(2) of the Income-tax Act outlines the consequences for taxpayers who do not pay their income tax on time. Failure to pay as specified in a notice of demand results in liability for simple interest at a rate of 1% per month. Section 220(2A) grants authority to certain officials to reduce or waive the amount owed in specified circumstances.
The Central Board of Direct Taxes (CBDT) has accordingly notified the specified monetary limits for the reduction or waiver of interest paid or payable under section 220(2) of the Income Tax Act, based on the authorities vested in them, as under:
| S. No. | Income-tax Authority | Monetary Limits for reduction or waiver of interest |
| 1 | Pr. CIT/CIT | Upto Rs 50 lacs |
| 2 | CCIT/DGIT | Above Rs 50 lacs and upto Rs 1.5 crore |
| 3 | Pr. CCIT | Above Rs 1.5 crore |
Reduction or waiver of interest payments under section 220(2) of the Act for income-tax authorities is subject to conditions outlined in section 220(2A). These conditions include:
(i) payment causing genuine hardship to the assessee,
(ii) default due to circumstances beyond control, and
(iii) cooperation in assessment inquiries or recovery proceedings.
If these conditions are satisfied, reduction or waiver of interest payments may be granted.
Taxpayers seeking waiver or reduction must show true hardship, uncontrollable circumstances causing delay, and cooperation with inquiries. Guidelines aim to simplify interest waivers for those in financial distress. Circular takes immediate effect and is available on income tax websites.
CBDT Income Tax Circular 15/2024 dated 04/11/2024: Order u/s 119(1) fixing monetary limits of the income-tax authorities in respect of reduction or waiver of interest paid or payable u/s 220(2)