My company paid its dividend distribution tax late. What interest runs, from when, and what can the Department do to recover the tax itself?
Section 115P charges simple interest at one per cent for every month or part of a month on the unpaid tax on distributed profits, running from the date immediately after the last date on which the tax was payable under s.115-O(3) — fourteen days from the earliest of declaration, distribution or payment — and ending on the date the tax is actually paid. Section 115Q then deems the principal officer and the company to be an assessee in default in respect of the amount payable, and applies all the provisions of the Act for the collection and recovery of income-tax.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2020-04-01, reported as Income-tax Act, 1961, ss.115P and 115Q, as printed on the departmental pages stamped Year: 2026 and Year: 2025. It bears on section 115P, section 115Q, section 115-O, section 115-O(3), section 220, section 222, section 226 of the Income Tax Act 1961, in Demand, Recovery & Stay and How Tax Law Is Read matters.
Both sections fasten on two people at once. Section 115P is worded 'Where the principal officer of a domestic company and the company fails to pay', and s.115Q likewise 'If any principal officer of a domestic company and the company does not pay'. So the principal officer is personally in the frame alongside the company for both the interest and the default consequence, and a notice addressed to the principal officer is not on that account bad. The interest is mechanical. It is 'simple interest', at one per cent 'for every month or part thereof', so a delay of one day into a month costs a full month; there is no proportionate computation and no discretion in the section to waive it. The start date is not the end of the financial year and not the due date of the return — it is the day after the fourteen-day period in s.115-O(3), which itself runs from the EARLIEST of declaration, distribution and payment. A company that declares in September and pays in November is already running interest from mid-September. Section 115Q is the collection provision and it is short by design: it does not create a separate assessment. There is no provision in Chapter XII-D for a separate adjudication of DDT liability, no separate DDT assessment order and no separate appeal against a DDT demand as such; the deeming in s.115Q simply opens the whole of the recovery machinery in Chapter XVII-D — s.220 onwards, s.222 and the Second Schedule, s.226 garnishee action — against the company and the principal officer. That is the practical reason a DDT dispute usually has to be brought up as a ground in the company's own appeal or, where the tax has been paid, through a refund claim, rather than by appealing a stand-alone DDT order. Note also that the Explanation to s.115Q is printed as omitted — '[***]' — on both the Year 2025 and Year 2026 departmental texts. Do not rely on any Explanation to s.115Q for a current-form argument.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Section 115P provides that where the principal officer of a domestic company and the company fails to pay the whole or any part of the tax on distributed profits referred to in s.115-O(1) within the time allowed under s.115-O(3), he or it shall be liable to pay simple interest at the rate of one per cent for every month or part thereof on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid. Section 115Q provides that if any principal officer of a domestic company and the company does not pay tax on distributed profits in accordance with s.115-O, then he or it shall be deemed to be an assessee in default in respect of the amount of tax payable by him or it and all the provisions of the Act for the collection and recovery of income-tax shall apply. The Explanation to s.115Q is printed as omitted.
Interest under s.115P runs at one per cent a month or part of a month from the day after the fourteen-day period in s.115-O(3) until actual payment, against the principal officer and the company; s.115Q deems both to be an assessee in default for unpaid DDT and applies the whole of the Act's collection and recovery machinery, without creating any separate DDT assessment.
This is statutory text, not a decision. The operative words are 'simple interest at the rate of one per cent for every month or part thereof' in s.115P, which excludes both compounding and proration, and 'all the provisions of this Act for the collection and recovery of income-tax shall apply' in s.115Q, which is a machinery provision and not a charging or assessing one.
he or it shall be liable to pay simple interest at the rate of one per cent for every month or part thereof on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid.
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Handle my notice → Ask a CA on WhatsAppSection 115P charges simple interest at one per cent for every month or part of a month on the unpaid tax on distributed profits, running from the date immediately after the last date on which the tax was payable under s.115-O(3) — fourteen days from the earliest of declaration, distribution or payment — and ending on the date the tax is actually paid. Section 115Q then deems the principal officer and the company to be an assessee in default in respect of the amount payable, and applies all the provisions of the Act for the collection and recovery of income-tax. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 115P, section 115Q, section 115-O, section 115-O(3), section 220, section 222, section 226 of the Income Tax Act 1961. It is reported as Income-tax Act, 1961, ss.115P and 115Q, as printed on the departmental pages stamped Year: 2026 and Year: 2025. Both sections fasten on two people at once. Section 115P is worded 'Where the principal officer of a domestic company and the company fails to pay', and s.115Q likewise 'If any principal officer of a domestic company and the company does not pay'. So the principal officer is personally in the frame alongside the company for both the interest and the default consequence, and a notice addressed to the principal officer is not on that account bad. The interest is mechanical. It is 'simple interest', at one per cent 'for every month or part thereof', so a delay of one day into a month costs a full month; there is no proportionate computation and no discretion in the section to waive it. The start date is not the end of the financial year and not the due date of the return — it is the day after the fourteen-day period in s.115-O(3), which itself runs from the EARLIEST of declaration, distribution and payment. A company that declares in September and pays in November is already running interest from mid-September. Section 115Q is the collection provision and it is short by design: it does not create a separate assessment. There is no provision in Chapter XII-D for a separate adjudication of DDT liability, no separate DDT assessment order and no separate appeal against a DDT demand as such; the deeming in s.115Q simply opens the whole of the recovery machinery in Chapter XVII-D — s.220 onwards, s.222 and the Second Schedule, s.226 garnishee action — against the company and the principal officer. That is the practical reason a DDT dispute usually has to be brought up as a ground in the company's own appeal or, where the tax has been paid, through a refund claim, rather than by appealing a stand-alone DDT order. Note also that the Explanation to s.115Q is printed as omitted — '[***]' — on both the Year 2025 and Year 2026 departmental texts. Do not rely on any Explanation to s.115Q for a current-form argument. If it applies to you, the first step is this: Fix the trigger date precisely: the earliest of declaration, distribution and payment of the dividend, then add fourteen days under s.115-O(3). Interest under s.115P starts the day after that, not from any return due date.
Section 115P provides that where the principal officer of a domestic company and the company fails to pay the whole or any part of the tax on distributed profits referred to in s.115-O(1) within the time allowed under s.115-O(3), he or it shall be liable to pay simple interest at the rate of one per cent for every month or part thereof on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid. Section 115Q provides that if any principal officer of a domestic company and the company does not pay tax on distributed profits in accordance with s.115-O, then he or it shall be deemed to be an assessee in default in respect of the amount of tax payable by him or it and all the provisions of the Act for the collection and recovery of income-tax shall apply. The Explanation to s.115Q is printed as omitted. The matter was decided on 2020-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Interest under s.115P runs at one per cent a month or part of a month from the day after the fourteen-day period in s.115-O(3) until actual payment, against the principal officer and the company; s.115Q deems both to be an assessee in default for unpaid DDT and applies the whole of the Act's collection and recovery machinery, without creating any separate DDT assessment.
This is statutory text, not a decision. The operative words are 'simple interest at the rate of one per cent for every month or part thereof' in s.115P, which excludes both compounding and proration, and 'all the provisions of this Act for the collection and recovery of income-tax shall apply' in s.115Q, which is a machinery provision and not a charging or assessing one. In the words reproduced by the source cited on this page: "he or it shall be liable to pay simple interest at the rate of one per cent for every month or part thereof on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid."
It was decided by the CBDT Circulars & Instructions on 2020-04-01 and is reported as Income-tax Act, 1961, ss.115P and 115Q, as printed on the departmental pages stamped Year: 2026 and Year: 2025. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 115P, section 115Q, section 115-O, section 115-O(3), section 220, section 222, section 226, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Interest under s.115P runs at one per cent a month or part of a month from the day after the fourteen-day period in s.115-O(3) until actual payment, against the principal officer and the company; s.115Q deems both to be an assessee in default for unpaid DDT and applies the whole of the Act's collection and recovery machinery, without creating any separate DDT assessment. It arises in Demand, Recovery & Stay and How Tax Law Is Read matters, on section 115P, section 115Q, section 115-O, section 115-O(3), section 220, section 222, section 226 of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Compute the interest as simple interest at one per cent for every month or part of a month; a part month is a whole month, and the section allows no proration. Check whether the demand is on the company alone or on the principal officer as well — both sections name the principal officer and the company, so a demand on the principal officer is within the sections. Do not look for a separate DDT assessment order to appeal. Section 115Q creates a deemed default, not an assessment; raise the DDT ground in the company's own appeal, or claim the excess back as a refund if it has been paid. If recovery has started, answer it as ordinary income-tax recovery: s.115Q applies 'all the provisions of this Act for the collection and recovery of income-tax', so stay applications and instalment requests run on the usual footing. Ignore any Explanation to s.115Q — it stands omitted on the current departmental text.
Superseded by amendment. Both sections are on the statute book unchanged as between the Year 2025 and Year 2026 departmental texts, but they operate only on a s.115-O liability, and s.115-O charges nothing on a dividend declared, distributed or paid after 31 March 2020. They are therefore live only for FY 2019-20 and earlier and for recovery flowing from those years — which is squarely inside this library's scope. No case law under s.115P or s.115Q was searched for this pass, so no judicial gloss on the mandatory character of the interest has been checked. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Section 115P was transcribed in full this pass from https://incometaxindia.gov.in/w/section-115p-31 (Year: 2026, heading 'Interest payable for non-payment of tax by domestic companies') and independently, word for word, from /w/section-115p-28 (Year: 2025). Section 115Q was transcribed from /w/section-115q-31 (Year: 2026, heading 'When company is deemed to be in default') and independently from /w/section-115q-28 (Year: 2025); both print the Explanation as '[***]'. The departmental pages for section 115-O, 115P, 115Q, 115R, 115S, 115T and 115BBDA print NO numbered footnote list at all, on any year's version I opened, so no commencement date and no amending Act number can be sourced from them. Where a date is given below it is either printed in the statutory text itself or bracketed between two year-stamped departmental versions, and the entry says which. I therefore cannot say when the s.115P rate became one per cent, nor when the s.115Q Explanation was omitted, and this entry states neither. The observation that the Act provides no separate adjudication or separate order for DDT liability, and that s.115Q merely provides the consequences of non-payment, is not mine: it is made by the Special Bench of the Mumbai Tribunal in DCIT v. Total Oil India Pvt. Ltd. (20 April 2023) at its paragraph 61, which I read this pass at https://indiankanoon.org/doc/125941536/?type=print. That decision is already in the library and is not proposed again here. On the date in decided_on: this is a statutory-position entry and 2020-04-01 is not a decision date, and it is not the commencement of s.115P or s.115Q, neither of which could be dated because the departmental pages carry no footnote list. It is the date from which the s.115-O liability that both sections operate on ceased to arise — 1 April 2020, the day after the 31 March 2020 end-date printed in s.115-O(1). This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Interest under s.115P runs at one per cent a month or part of a month from the day after the fourteen-day period in s.115-O(3) until actual payment, against the principal officer and the company; s.115Q deems both to be an assessee in default for unpaid DDT and applies the whole of the Act's collection and recovery machinery, without creating any separate DDT assessment.
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