The company paid its buy-back consideration months ago and has only now been told it owes tax under section 115QA. How long did it have, what interest runs, and who can the department recover from?
This machinery bites only on buy-backs that s.115QA governs, which means buy-backs before 1 October 2024; for a buy-back on or after that date there is no company-level charge to collect, because the second proviso to s.115QA(1) disapplies the section. Within that window, s.115QA(3) requires the principal officer of the domestic company AND the company to pay the tax to the credit of the Central Government "within fourteen days from the date of payment of any consideration to the shareholder on buy-back of shares". Section 115QB imposes simple interest at one per cent for every month or part of a month on unpaid tax, running from the day immediately after the last date on which the tax was payable to the date it is actually paid. Section 115QC then provides that where the principal officer and the company do not pay, "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 this Act for the collection and recovery of income-tax shall apply".
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2013-06-01, reported as Section 115QA(3), section 115QB and section 115QC of the Income-tax Act, 1961, as amended up to 2025; s.115QA(4), (5) and s.115QC reproduced by the ITAT Rajkot in Bhikhalal Prahladrai Agarwal (HUF) v. ACIT (21 August 2025) at its paragraphs 30 and 39. It bears on section 115QA, section 115QA(3), section 115QA(4), section 115QA(5), section 115QB, section 115QC, section 10(34A), section 220 of the Income Tax Act 1961, in Demand, Recovery & Stay, How Tax Law Is Read and Capital Gains matters.
Three consequences follow that are easy to miss. First, the clock is short and it does not run from the year end or from the assessment — it runs from the date of payment of the consideration to the shareholder, so a company that pays out in instalments has a separate fourteen-day window on each payment. Second, s.115QB's interest is not the s.220(2) interest; it is a standalone charge at one per cent per month or part thereof from the day after the due date, and it runs whether or not any demand has been raised. Third, the exposure is personal. Section 115QC makes the principal officer, as well as the company, a deemed assessee in default for the tax payable "by him or it", and applies the whole recovery apparatus of the Act. That is the department's route where a buy-back tax has not been paid — and it is precisely why an Assessing Officer cannot instead recover the shortfall by taxing the shareholder. The ITAT Rajkot made that point in terms on 21 August 2025: where the company underpays, "recovery proceedings can be initiated against the principal officer of the company or against the company as per section 115QC of the Act", and there is "no provision for recovery from the shareholder by way of denial of exemption u/s 10(34A)". Finally, read the finality provisions alongside: s.115QA(4) makes the tax the final payment on that income with no further credit to the company or any other person, and s.115QA(5) denies any deduction under any other provision of the Act to the company or the shareholder in respect of that income or the tax on it — so the interest and the tax are pure cost.
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 115QA(3) reads: "The principal officer of the domestic company and the company shall be liable to pay the tax to the credit of the Central Government within fourteen days from the date of payment of any consideration to the shareholder on buy-back of shares referred to in sub-section (1)." Section 115QB reads: "115QB. Where the principal officer of the domestic company and the company fails to pay the whole or any part of the tax on the distributed income referred to in sub-section (1) of section 115QA, within the time allowed under sub-section (3) of that section, 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 115QC, as reproduced verbatim by the ITAT Rajkot on 21 August 2025, reads: "If any principal officer of a domestic company and the company does not pay tax on distributed income in accordance with the provisions of section 115QA, 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 this Act for the collection and recovery of income-tax shall apply." Sub-sections (4) and (5) of s.115QA, from the same sources, make the tax the final payment of tax on that income with no further credit to the company or any other person, and deny any deduction under any other provision of the Act to the company or a shareholder in respect of that income or the tax on it.
Not a judgment. The statutory position is that the principal officer of the domestic company and the company must pay the s.115QA tax within fourteen days of each payment of buy-back consideration to a shareholder; that simple interest at one per cent for every month or part of a month runs on unpaid tax from the day after the due date to the date of actual payment; and that on non-payment the principal officer and the company are deemed to be assessees in default, with the whole collection and recovery machinery of the Act applying to them.
Not a judgment; no judicial reasoning is stated for these provisions. On their function the ITAT Rajkot held on 21 August 2025 that if a company did not pay the proper tax on a buy-back under s.115QA, "in such case, recovery proceedings can be initiated against the principal officer of the company or against the company as per section 115QC of the Act", and that "In the absence of actual tax payment or short/improper tax payment, the recovery has to be made from the company and there is no provision for recovery from the shareholder by way of denial of exemption u/s 10(34A) of the Act."
Where the principal officer of the domestic company and the company fails to pay the whole or any part of the tax on the distributed income referred to in sub-section (1) of section 115QA, within the time allowed under sub-section (3) of that section, 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 WhatsAppThis machinery bites only on buy-backs that s.115QA governs, which means buy-backs before 1 October 2024; for a buy-back on or after that date there is no company-level charge to collect, because the second proviso to s.115QA(1) disapplies the section. Within that window, s.115QA(3) requires the principal officer of the domestic company AND the company to pay the tax to the credit of the Central Government "within fourteen days from the date of payment of any consideration to the shareholder on buy-back of shares". Section 115QB imposes simple interest at one per cent for every month or part of a month on unpaid tax, running from the day immediately after the last date on which the tax was payable to the date it is actually paid. Section 115QC then provides that where the principal officer and the company do not pay, "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 this Act for the collection and recovery of income-tax shall apply". This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 115QA, section 115QA(3), section 115QA(4), section 115QA(5), section 115QB, section 115QC, section 10(34A), section 220 of the Income Tax Act 1961. It is reported as Section 115QA(3), section 115QB and section 115QC of the Income-tax Act, 1961, as amended up to 2025; s.115QA(4), (5) and s.115QC reproduced by the ITAT Rajkot in Bhikhalal Prahladrai Agarwal (HUF) v. ACIT (21 August 2025) at its paragraphs 30 and 39. Three consequences follow that are easy to miss. First, the clock is short and it does not run from the year end or from the assessment — it runs from the date of payment of the consideration to the shareholder, so a company that pays out in instalments has a separate fourteen-day window on each payment. Second, s.115QB's interest is not the s.220(2) interest; it is a standalone charge at one per cent per month or part thereof from the day after the due date, and it runs whether or not any demand has been raised. Third, the exposure is personal. Section 115QC makes the principal officer, as well as the company, a deemed assessee in default for the tax payable "by him or it", and applies the whole recovery apparatus of the Act. That is the department's route where a buy-back tax has not been paid — and it is precisely why an Assessing Officer cannot instead recover the shortfall by taxing the shareholder. The ITAT Rajkot made that point in terms on 21 August 2025: where the company underpays, "recovery proceedings can be initiated against the principal officer of the company or against the company as per section 115QC of the Act", and there is "no provision for recovery from the shareholder by way of denial of exemption u/s 10(34A)". Finally, read the finality provisions alongside: s.115QA(4) makes the tax the final payment on that income with no further credit to the company or any other person, and s.115QA(5) denies any deduction under any other provision of the Act to the company or the shareholder in respect of that income or the tax on it — so the interest and the tax are pure cost. If it applies to you, the first step is this: Map every payment of buy-back consideration to its own fourteen-day due date, and compute s.115QB interest from the day after each of them at one per cent per month or part of a month.
Section 115QA(3) reads: "The principal officer of the domestic company and the company shall be liable to pay the tax to the credit of the Central Government within fourteen days from the date of payment of any consideration to the shareholder on buy-back of shares referred to in sub-section (1)." Section 115QB reads: "115QB. Where the principal officer of the domestic company and the company fails to pay the whole or any part of the tax on the distributed income referred to in sub-section (1) of section 115QA, within the time allowed under sub-section (3) of that section, 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 115QC, as reproduced verbatim by the ITAT Rajkot on 21 August 2025, reads: "If any principal officer of a domestic company and the company does not pay tax on distributed income in accordance with the provisions of section 115QA, 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 this Act for the collection and recovery of income-tax shall apply." Sub-sections (4) and (5) of s.115QA, from the same sources, make the tax the final payment of tax on that income with no further credit to the company or any other person, and deny any deduction under any other provision of the Act to the company or a shareholder in respect of that income or the tax on it. The matter was decided on 2013-06-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Not a judgment. The statutory position is that the principal officer of the domestic company and the company must pay the s.115QA tax within fourteen days of each payment of buy-back consideration to a shareholder; that simple interest at one per cent for every month or part of a month runs on unpaid tax from the day after the due date to the date of actual payment; and that on non-payment the principal officer and the company are deemed to be assessees in default, with the whole collection and recovery machinery of the Act applying to them.
Not a judgment; no judicial reasoning is stated for these provisions. On their function the ITAT Rajkot held on 21 August 2025 that if a company did not pay the proper tax on a buy-back under s.115QA, "in such case, recovery proceedings can be initiated against the principal officer of the company or against the company as per section 115QC of the Act", and that "In the absence of actual tax payment or short/improper tax payment, the recovery has to be made from the company and there is no provision for recovery from the shareholder by way of denial of exemption u/s 10(34A) of the Act." In the words reproduced by the source cited on this page: "Where the principal officer of the domestic company and the company fails to pay the whole or any part of the tax on the distributed income referred to in sub-section (1) of section 115QA, within the time allowed under sub-section (3) of that section, 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 2013-06-01 and is reported as Section 115QA(3), section 115QB and section 115QC of the Income-tax Act, 1961, as amended up to 2025; s.115QA(4), (5) and s.115QC reproduced by the ITAT Rajkot in Bhikhalal Prahladrai Agarwal (HUF) v. ACIT (21 August 2025) at its paragraphs 30 and 39. 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 115QA, section 115QA(3), section 115QA(4), section 115QA(5), section 115QB, section 115QC, section 10(34A), section 220, 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. Not a judgment. The statutory position is that the principal officer of the domestic company and the company must pay the s.115QA tax within fourteen days of each payment of buy-back consideration to a shareholder; that simple interest at one per cent for every month or part of a month runs on unpaid tax from the day after the due date to the date of actual payment; and that on non-payment the principal officer and the company are deemed to be assessees in default, with the whole collection and recovery machinery of the Act applying to them. It arises in Demand, Recovery & Stay, How Tax Law Is Read and Capital Gains matters, on section 115QA, section 115QA(3), section 115QA(4), section 115QA(5), section 115QB, section 115QC, section 10(34A), section 220 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. Pay the principal tax before arguing about quantum. The interest is a monthly charge that continues to run and is not compounded on a demand, so delay is expensive regardless of the merits. If the demand names the principal officer, check whether he is a principal officer within the meaning of the Act for the relevant period; s.115QC attaches the default to "the principal officer of a domestic company and the company", and identity is a live issue where officers have changed. Where the department is instead proposing to tax the shareholder because the company underpaid, take the point that s.115QC is the prescribed recovery route and that the shareholder's exemption is not a recovery mechanism. Do not budget for a credit or a deduction. Sub-sections (4) and (5) of s.115QA shut out both, for the company and for the shareholder. For a buy-back on or after 1 October 2024, check that no s.115QA machinery is being applied at all — the charge moved to the shareholder under s.2(22)(f) and this Chapter has no work to do.
Still good law. The Chapter as stated here is current for the period it governs, and the switch-off can be attributed. The current text of section 115QA carries an amendment footnote attributing the second proviso — which takes buy-backs on or after 1 October 2024 out of the charge — to Act No. 15 of 2024, the Finance (No. 2) Act 2024, with effect from 1 October 2024. Buy-backs between 1 June 2013 and 30 September 2024 remain within the Chapter, and demands, interest and recovery for that period remain live notwithstanding the prospective switch-off; that is where these provisions now do their work. ONE LIMIT REMAINS ON SECTION 115QB. Three printings of it, as amended up to 2013, 2014 and 2016, give it in identical words and none carries an amendment footnote, and no printing later than 2016 attests it, so a later amendment cannot be positively excluded — though none has been found. Anyone computing interest for a long-outstanding demand should read the section itself rather than rely on this entry for the rate. Subject to that, the fourteen-day window in s.115QA(3), the one per cent a month simple interest in s.115QB running from the day after the due date to the date of actual payment, and the principal officer and the company becoming assessees in default under s.115QC with the recovery provisions applying, are as stated. No decision construing s.115QB or s.115QC has been found beyond the Rajkot Tribunal order relied on here, so how the interest interacts with s.220(2) on the same demand, and whether the principal officer's liability under s.115QC is joint or several with the company's, are open questions this entry does not answer. These are provisions of the Income-tax Act 1961, replaced by the Income-tax Act 2025 with effect from 1 April 2026; they continue to govern the earlier years, which is where buy-back tax disputes now sit. 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.
'decided_on' is 1 June 2013, the commencement of the whole Chapter, taken from the footnote "Chapter XII-DA, consisting of sections 115QA to 115QC, inserted by the Finance Act, 2013, w.e.f. 1-6-2013." It is not a date of decision and it is not the vintage of any printing. HOW EACH PROVISION IS SOURCED, because two of the three rest on more than one route and one of them cannot be dated. Section 115QB was read on three printings of the section — as amended up to 2013, up to 2014 and up to 2016 — which give it in identical words, simple interest at one per cent for every month or part thereof. None of the three carries an amendment footnote, and no later printing has been located, so a later amendment to it cannot be positively excluded. Section 115QC was read on a printing headed "When company is deemed to be assessee in default", which gives it in the same words as the ITAT Rajkot's verbatim reproduction in an order dated 21 August 2025 — a document post-dating any amendment that could have been made, which is the strongest confirmation available that the section is unchanged. Sub-sections (3), (4) and (5) of section 115QA come from two printings, as amended up to 2013 and currently, and from the same Tribunal order, all of which agree. TWO POINTS OF SCOPE. This entry sets out the collection machinery only. Whether a particular payment is a buy-back within section 115QA(1), how the distributed income is computed under that sub-section, and whether the company is a domestic company are all prior questions and are not addressed here. And the machinery bites only on buy-backs that section 115QA governs, which since 1 October 2024 means buy-backs before that date; for a later buy-back there is no company-level charge to collect, the consideration being a deemed dividend in the shareholder's hands instead, so nothing in this entry applies to it. A practitioner meeting a fourteen-day demand should first fix the date of each payment of consideration, because the window runs from each payment separately and not from the completion of the buy- back. Note also that s.115QB is a standalone interest charge and is not the interest under s.220(2) on a demand; it runs from the day after the fourteen days expire whether or not any demand has been raised, so a company that discovers the liability years later owes interest for the whole intervening period as a matter of the section's own words. 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.
Not a judgment. The statutory position is that the principal officer of the domestic company and the company must pay the s.115QA tax within fourteen days of each payment of buy-back consideration to a shareholder; that simple interest at one per cent for every month or part of a month runs on unpaid tax from the day after the due date to the date of actual payment; and that on non-payment the principal officer and the company are deemed to be assessees in default, with the whole collection and recovery machinery of the Act applying to them.
TaxSphere, “Statutory position — s.115QA(3), s.115QB and s.115QC: the fourteen-day payment window on buy-back tax, one per cent a month interest, and the principal officer who becomes an assessee in default”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-115qa-3-115qb-and-115qc-fourteen-days-one-per-cent-a-month-and-who-becomes-the-assessee-in-default/ (validity last checked 2026-09-16)
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The department has raised a demand on my client company under section 115QA on a buy-back. Which buy-backs does the section actually reach, at what rate, on what figure, and is it still alive?
The Assessing Officer has fastened buy-back tax under s.115QA on my company. Do I have a right of appeal, or must I go to the High Court by writ?
My client claimed the buy-back proceeds as exempt under section 10(34A). The Assessing Officer says the company paid too little buy-back tax, so he has denied the exemption and assessed the whole gain under section 46A. Can he do that?
For a buy-back completed before 1 October 2024 my client claimed the whole receipt as exempt under section 10(34A). The officer says the company got its section 115QA computation wrong, so the exemption goes. Is that right — and does the exemption still exist for a buy-back done now?
