Section 194N Exemption for Foreign Representations: Key Highlights of the New Income-Tax Notification

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  On 28th November 2024 , the Ministry of Finance issued Notification No. 123/2024 , bringing clarity to the applicability of Section 194N of the Income-tax Act, 1961. The notification exempts specified foreign representations from the provisions of this section, reinforcing India's commitment to international diplomatic norms and global cooperation. Effective from 1st December 2024 , this move comes after due consultation with the Reserve Bank of India (RBI) and aligns with international protocols such as the Vienna Convention and the United Nations Privileges and Immunities Act . Understanding Section 194N of the Income-tax Act Section 194N mandates tax deduction at source (TDS) on cash withdrawals exceeding ₹1 crore in a financial year . The provision applies to withdrawals from banks, co-operative banks, and post offices, aiming to curb cash usage and promote digital transactions. Fifth Proviso to Section 194N The fifth proviso grants the Central Government the authority ...
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Monetary Limits for Reduction or Waiver of Interest under Section 220(2) of the Income Tax Act, 1961: Understanding CBDT’s Latest Circular

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The Central Board of Direct Taxes (CBDT) recently issued Circular No. 15/2024, introducing crucial updates for taxpayers and tax authorities regarding the reduction or waiver of interest levied under Section 220(2) of the Income Tax Act, 1961. Effective from November 4, 2024, the circular specifies new monetary limits that guide various income tax authorities in handling requests for interest relief under Section 220(2). This article will delve into the key aspects of this circular, exploring its implications for taxpayers and the tax administration.

Understanding Section 220(2) and 220(2A) of the Income Tax Act

Section 220(2) of the Income Tax Act is central to taxpayers who face interest charges due to delayed tax payments. When an assessee fails to pay tax within the stipulated time mentioned in a demand notice under Section 156, they become liable to pay a simple interest of 1% per month on the overdue amount until the payment is made. However, certain circumstances, like financial hardship or uncontrollable factors, may make it challenging for the taxpayer to meet these demands.

This is where Section 220(2A) comes into play. Under Section 220(2A), specified income tax authorities have the power to reduce or waive interest charges if certain conditions are met. These authorities include the Principal Chief Commissioner (Pr. CCIT), Chief Commissioner (CCIT), Principal Commissioner (Pr. CIT), and Commissioner (CIT). This relief mechanism is designed to prevent undue hardship to taxpayers facing genuine difficulties.

Key Points of Circular No. 15/2024

The latest circular, Circular No. 15/2024, establishes clear monetary limits within which each level of income tax authority can operate when considering requests for interest relief. Here are the major highlights:

1. Specified Monetary Limits for Interest Waiver/Reduction

According to the new circular, the power of different income tax authorities to waive or reduce interest is limited by specific monetary thresholds. The table below outlines these limits:

  • Pr. CIT / CIT - Authorized to handle cases where the interest waiver or reduction is up to ₹50 lakhs.
  • CCIT / DGIT - Authorized for cases where the interest waiver or reduction ranges from ₹50 lakhs to ₹1.5 crore.
  • Pr. CCIT - Authorized for cases exceeding ₹1.5 crore.

These limits are set to ensure that cases requiring high-value decisions are handled by higher authorities, enabling a more balanced and efficient decision-making process.

2. Conditions for Waiver or Reduction of Interest

The powers granted under Section 220(2A) are exercised under specific conditions to ensure relief is granted judiciously. The assessee must meet the following three conditions:

  • Genuine Hardship: The taxpayer must demonstrate that the payment of the demanded amount has caused or would cause genuine financial hardship.
  • Circumstances Beyond Control: The taxpayer’s failure to meet the tax demand must be due to reasons beyond their control, such as a significant financial loss or unforeseen life events.
  • Cooperation with Authorities: The taxpayer should have cooperated in all assessment and recovery proceedings related to the outstanding tax amount.

These conditions ensure that only genuine cases receive relief and prevent misuse of these provisions.

3. Effective Date of the Circular

The provisions specified in this circular are effective immediately, starting from the date of issue (November 4, 2024). Any applications submitted after this date will be considered under the new monetary limits and conditions.

FAQs

1. What is the purpose of Section 220(2) of the Income Tax Act?
Section 220(2) mandates that taxpayers who fail to pay their tax dues by the deadline are liable to pay interest of 1% per month on the outstanding amount until it is paid.

2. What conditions must be met to qualify for interest waiver or reduction under Section 220(2A)?
Taxpayers must show genuine hardship, uncontrollable circumstances for non-payment, and cooperation with tax authorities.

3. What are the new monetary limits for interest waiver under Circular No. 15/2024?

  • Pr. CIT / CIT: Up to ₹50 lakhs
  • CCIT / DGIT: Above ₹50 lakhs to ₹1.5 crore
  • Pr. CCIT: Above ₹1.5 crore

4. When did these new limits come into effect?
The new limits took effect on November 4, 2024, the date of issue of the circular.

5. How can taxpayers apply for an interest waiver or reduction?
Taxpayers should submit a detailed application to the relevant income tax authority within the specified monetary limit, including documentation to prove eligibility based on genuine hardship and uncontrollable circumstances.

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