The order has been issued under Section 119 of the Income Tax Act.
The Income Tax Department has recently given relief to taxpayers who received notice to pay additional tax due to the wrong 87A exemption. The Central Board of Direct Taxes (CBDT) has said that if such taxpayers pay their dues by 31 December 2025, then they will not be imposed late payment. This order has been issued under Section 119 of the Income Tax Act.
CBDT said in the circular, “In some cases returns had already been processed and income was given under Section 87A on tax income at a special rate.” Such cases will have to be improved and the wrong given exemption will have to be withdrawn. This will cause tax demand. If this demand is not paid on time Income tax Interest has to be paid under Section 220 (2) of the Act. Tax demand has increased due to these mistakes. Since taxpayers have to return this amount, interest could also be charged under Section 220 (2) on late payment.
What is section 220 (2)?
According to this provision, if a taxpayer does not pay tax on time, then interest is imposed on the outstanding amount. This interest keeps increasing until the complete payment is made.
Section 87A and special rate income
Section 87A gives tax exemption to small taxpayers if their total income is less than a fixed limit (now ₹ 7 lakh). But this discount only applies to normal income. If someone’s income is taxable at a particular rate, such as capital gains or lottery income, then there will be no discount of 87A on that part.
Now these taxpayers are relieved
CBDT has said that if such taxpayers pay their dues by 31 December 2025, then interest will not be imposed. But if no one pays till this date, then interest will be charged under Section 220 (2) from the last date of normal payment. In the circular, it was said, in view of the real problem caused by the interest payable to taxpayers under Section 220 (2), CBDT uses the rights of its section 119 to order that if the demand is repaid by 31.12.2025, the interest of Section 220 (2) will be waived.
Why is this step important?
For many taxpayers, this situation suddenly became because they had already received refunds or less taxes were shown. Later, when the mistake was corrected, he received a demand notice. Therefore, in view of the human aspect, CBDT has decided to waive interest, provided the payment is made on time.
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