The Central Board of Direct Taxes (CBDT) has issued Circular No. 13/2025 dated 19 September 2025, granting relief from interest payable under section 220(2) of the Income-tax Act, 1961 in specific cases. It was observed that in some instances, taxpayers were incorrectly granted rebate under section 87A on incomes chargeable to special tax rates under Chapter XII while opting for section 115BAC(1A). Subsequent rectifications to disallow such rebates resulted in additional demands being raised. Normally, any delay in paying these demands attracts interest under section 220(2). To reduce hardship for affected taxpayers, the CBDT has directed that such interest will be waived if the demand raised through rectification is paid on or before 31 December 2025. However, if the payment is not made by this date, interest under section 220(2) will apply from the day after the period allowed under section 220(1). This relief measure is aimed at providing fair treatment to taxpayers who were impacted due to rebate errors and ensures clarity on the timelines for compliance.
F. 275/09/2025-IT(Budget)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
Circular No. 13/2025-Income Tax |Dated:19th September, 2025
Subject: Order under section 119 of the Income-tax Act, 1961 for waiver of interest payable under section 220(2) due to late payment of demand, in certain cases -reg.
The provisions of section 115BAC(1A) of the Income-tax Act, 1961 (`the Act’) are subject to the other provisions of Chapter XII of the Act. Therefore, incomes chargeable to tax at special rates as specified under various provisions of Chapter XII of the Act are not included while determining the chargeability to tax under section 115BAC(1A) of the Act. Further, the clause (b) of proviso to section 87A is applicable to incomes chargeable to tax under section 115 BAC(1 A) of the Act.
2. It is noticed that in certain cases, the returns had already been processed and rebate was allowed under section 87A of the Act on incomes chargeable to tax at special rates. In such cases, rectifications have to be carried out to disallow such rebate, which has been incorrectly allowed. Such rectifications will result in demands getting raised. If the payments of such demands raised are delayed then the same are liable for charging of interest under section 220(2) of the Act .
3. In order to mitigate the genuine hardship arising to such taxpayers on account of interest payable under section 220(2) of the Act, the Central Board of Direct Taxes (`the Board’), in exercise of its powers conferred under section 119 of the Act, directs that the interest payable under section 220(2) of the Act shall be waived in such cases where the payment of the demands raised, is made on or before 31.12.2025.
4. In such cases, if a taxpayer fails to pay the demand raised as a result of rectification order passed by the CPC on or before 31.12.2025, the interest shall be charged under section 220(2) of the Act from the day immediately following the end of the period mentioned in subsection (1) of section 220 of the Act.
5. Hindi version shall follow.
(Rajendra Kumar Meena)
Under Secretary, IT-Budget
CBDT
Copy to:-
1. The Chairman & Members, CBDT
2. All Pr.CCsIT, CCsIT/ DGsIT.
3. All Joint Secretaries/CsIT, CBDT.
4. Commissioner of Income-tax (Media & TP) and official Spokesperson, CBDT, New Delhi.
5. ADG (PR, P&P) for necessary action.
6. JCIT, Database Cell, with a request to upload the order on the website irsofficersonline.gov.in.
7. Web Manager, 0/o DGIT(Systems) with request to upload on the departmental website of incometaxindia.gov.in.
8. The Institute of Chartered Accountants of India, IP Estate, New Delhi
9. All Chambers of Commerce.
10. Hindi Cell for translation.
11. The Guard File.
(Rajendra Kumar Meena)
Under Secretary, IT-Budget
CBDT
who already paid interest on demand can get refund of interest amount?
what is the process?
court already passed order to allow the rebate 87a for eligible taxpayers.
so how the h department still fighting for illegal tax?
on what basis? as final outcome is no demand.
is this democracy? they want to suck out all the money from small middle class taxpayers.
those taxpayers are only middle class not rich like Ambani.
this government still intentionally want to harras us!!!
please give the details of court judgement/citation. I think ITAT allowed rebate on STCG Court order will be helpful. Please share the court order details.
Thanks