When tax payable and when assessee deemed in default [ Section 220 ] - Income Tax - Ready Reckoner - Income Tax

When tax payable and when assessee deemed in default [ Section 220 ] Time Limit of Payment [ Section 220(1) ] Any amount (other than advance tax) specified as payable in a notice of demand under section 156 shall be paid within 30 days of the service of the notice at the place and to the person mentioned in the notice. Required prior approval - where the Assessing Officer has any reason to believe that it will be detrimental to revenue if the full period of 30 days aforesaid is allowed, he may, with the previous approval of the Joint Commissioner, direct that the sum specified in the notice of demand shall be paid within such period being a period less than the period of thirty days aforesaid, as may be specified by him in the notice of demand. [ First Proviso of section 220(1) ] (1A) Where any notice of demand has been served upon an assessee and any appeal or other proceeding, as the case may be, is filed or initiated in respect of the amount specified in the said notice of demand, then, such demand shall be deemed to be valid till the disposal of the appeal by the last appellate authority or disposal of the proceedings, as the case may be, and any such notice of demand shall have the effect as specified in section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964. For making late payment of income tax [ Section 220(2) ] If the amount specified in any notice of demand under section 156 is not paid within the period limited under section 220(1), the assessee shall be liable to pay simple interest at 1% for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in section 220(1) and ending with the day on which the amount is paid. Where as a result of an order under section 154, or section 155, or section 250, or section 254, or section 260, or section 262, or section 264 or an order of the Settlement Commission under section 245D(4), the amount on which interest was payable under this section had been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded. [ First Proviso of Section 220(2) ] Where as a result of an order under sections specified in the first proviso, the amount on which interest was payable under this section had been reduced and subsequently as a result of an order under said sections or section 263, the amount on which interest was payable under this section is increased, the assessee shall be liable to pay interest under section 220(2) from the day immediately following the end of the period mentioned in the first notice of demand, referred to in section 220(1) and ending with the day on which the amount is paid. [ Second Proviso of section 220(2) ] In respect of any period commencing on or before the 31st day of March, 1989 and ending after that date, such interest shall, in respect of so much of such period as falls after that date, be calculated at the rate of one and one-half per cent, for every month or part of a month. [ Third Proviso of section 220(2) ] Exception of section 220(2) Notwithstanding anything contained in section 220(2), where interest is charged under section 201(1A) on the amount of tax specified in the intimation issued under section 200A(1) for any period, then, no interest shall be charged under section 220(2) on the same amount for the same period. [ Section 220(2B) ] Notwithstanding anything contained in section 220(2), where interest is charged under section 206C(7) on the amount of tax specified in the intimation issued under section 206CB(1) for any period, then, no interest shall be charged under section 220(2) on the same amount for the same period. [ Section 220(2C) ] Reduction or waiver of interest [ Section 220(2A) ] Notwithstanding anything contained in section 220(2), the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may reduce or waive the amount of interest paid or payable by an assessee under the said sub-section if he is satisfied that- ( i ) payment of such amount has caused or would cause genuine hardship to the assessee ; ( ii ) default in the payment of the amount on which interest has been paid or was payable under the said sub-section was due to circumstances beyond the control of the assessee ; and ( iii ) the assessee has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him. The order accepting or rejecting the application of the assessee, either in full or in part, shall be passed within a period of twelve months from the end of the month in which the application is received. [ First Proviso of section 220(2A) ] No order rejecting the application, either in full or in part, shall be passed unless the assessee has been given an opportunity of being heard. [ Second Proviso of section 220(2A) ] Where any application is pending as on the 1st day of June, 2016, the order shall be passed on or before the 31st day of May, 2017. [ Third Proviso of section 220(2A) ] In respect of reduction or waiver of the interest paid or payable under section 220(2) of the Act, the Central Board of Direct Taxes, for the proper administration of the Act, hereby specifies the following monetary limits as under: S.No. Income-tax Authority Monetary Limits for reduction or waiver of interest 1. Pr.ClT/ CIT Upto Rs.50 lacs 2. CCIT/ DGIT Above Rs. 50 Iacs to Rs. 1.5 crore 3. Pr.CCIT Above Rs. 1.5 crore Extension of Time for Payment or Instalment Option for Assessees Under Section 220(1) Without prejudice to the provisions contained in section 220(2), on an application made by the assessee before the expiry of the due date under section 220(1), the Assessing Officer may extend the time for payment or allow payment by instalments, subject to such conditions as he may think fit to impose in the circumstances of the case. [ Section 220(3) ] If the amount is not paid within the time limited under section 220(1) or extended under section 220(3), as the case may be, at the place and to the person mentioned in the said notice the assessee shall be deemed to be in default. [ Section 220(4) ] If, in a case where payment by instalments is allowed under section 220(3), the assessee commits defaults in paying any one of the instalments within the time fixed under that sub-section, the assessee shall be deemed to be in default as to the whole of the amount then outstanding, and the other instalment or instalments shall be deemed to have been due on the same date as the instalment actually in default. [ Section 220(5) ] Other points Where an assessee has presented an appeal under section 246 or section 246A the Assessing Officer may, in his discretion and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as such appeal remains undisposed of. [ Section 220(6) ] Where an assessee has been assessed in respect of income arising outside India in a country the laws of which prohibit or restrict the remittance of money to India, the Assessing Officer shall not treat the assessee as in default in respect of that part of the tax which is due in respect of that amount of his income which, by reason of such prohibition or restriction, cannot be brought into India, and shall continue to treat the assessee as not in default in respect of such part of the tax until the prohibition or restriction is removed. [ Section 220(7) ] Explanation. -For the purposes of this section, income shall be deemed to have been brought into India if it has been utilised or could have been utilised for the purposes of any expenditure actually incurred by the assessee outside India or if the income, whether capitalised or not, has been brought into India in any form. Important Notifications Circulars Order under section 119(1) of the Income-tax Act, 1961 fixing monetary limits of the income-tax authorities in respect of reduction or waiver of interest paid or payable under section 220(2) of the Income-tax Act. [ Circular No. 15/2024 Dated 04.11.2024 ] Levy of interest under section 220(2) when the original assessment is set aside-Instructions regarding. [ Circular No. 334 Dated 03.04.1982 ]