The Central Board of Direct Taxes (CBDT) issued a circular for waiver of interest in disputed tax demand in various scenarios. Tax officials can now waive or reduce interest in cases where the taxpayer did not deduct tax based on a high court ruling that was subsequently overturned by the Supreme Court or via a retrospective amendment.
“However, no reduction or waiver of such interest shall be ordered unless the principal demand… stands fully paid or satisfactory arrangements for payment of the principal demand have been made,” CBDT guidelines to chief commissioner of income tax and director general of income tax said.
The guidelines also state that interest can be waived in cases where tax deduction at source could not happen because of seizure of books of accounts and other documents by the income tax department. The same can also be done in cases where the default is related to “non-deduction or a lower deduction of tax in respect of a payment made to a non-resident (including a foreign company) being a resident of a country or specified territory outside India with whom India has entered into an agreement.”