s.115QB — Interest payable for non-payment of tax by company
Simple interest at one per cent for every month or part of a month where the company did not pay the section 115QA tax, on a buy-back before 1 October 2024, within the fourteen days that section allows.
Spent rather than repealed, and spent only prospectively. The section was inserted with Chapter XII-DA by clause 31 of the Finance Act, 2013 with effect from 1 June 2013, in the terms it still carries, and it was given no sunset words of its own; it runs only on tax on distributed income referred to in section 115QA(1), and that tax arises only on a buy-back that took place before 1 October 2024, so the section reaches those years and no later ones. For them it is fully live, because the sunset proviso inserted in 2024 operates on section 115QA(1) alone and leaves sub-sections (2) to (5) of that section in force. The Income-tax Act, 2025 carries no counterpart.
Income-tax Act, 1961
s.115QB
Income-tax Act, 2025
No equivalent: charge not re-enacted
In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.
In short
Section 115QB charges simple interest where the tax on the distributed income referred to in section 115QA(1) is not paid within the time section 115QA(3) allows. The rate is one per cent for every month or part of a month on the amount of such tax, for the period beginning on the date immediately after the last date on which the tax was payable and ending with the date on which it is actually paid. The time allowed is the fourteen days in section 115QA(3), running from the date of payment of any consideration to the shareholder on the buy-back, so the clock is keyed to payment and not to the assessment year or the return. The interest is simple, not compound, and a part of a month counts as a month. It is charged on the amount of the unpaid tax, so a part payment reduces the base rather than stopping the running. And the liability is on the principal officer and on the company, in the same terms as the payment obligation. The rest of the chapter completes the machinery. Section 115QC deems the principal officer and the company to be an assessee in default where the tax is not paid in accordance with section 115QA, with the whole of the Act's collection and recovery provisions applying. There is no counterpart in the Income-tax Act, 2025, which charges no tax on a company on a buy-back for interest to run on, and the Department's navigator mapping the 1961 Act to the new Act marks sections 115QA, 115QB and 115QC redundant with no successor section against any of them, that navigator being a mapping document and not the enacted Act.
What the provision does
Prices the delay. It runs simple interest at one per cent for every month or part of a month on the unpaid section 115QA tax, from the day immediately after the last day of the fourteen-day period in section 115QA(3) to the day the tax is actually paid, and it fastens that liability on the principal officer as well as on the company. It does not charge tax, and it is not a penalty. It does not extend the time for payment, which section 115QA(3) alone fixes, and it does not create a liability where none arises under section 115QA(1), so it has nothing to run on for a buy-back that took place on or after 1 October 2024. It is not the recovery provision either, that being section 115QC, and it reaches no shareholder, the two persons named being the company and its principal officer.
Threshold questions
- Which date the company paid the consideration to the shareholder on, because the fourteen days in section 115QA(3) run from it
- Whether the buy-back took place before 1 October 2024, because interest runs only on tax on distributed income referred to in section 115QA(1)
- What the tax on the distributed income is, since the interest is computed on that amount and any change in the subtrahend changes the interest
- Which date the tax was actually paid on, which is the date the section closes the period with
- Whether the consideration was paid in tranches, because section 115QA(3) runs from the date of payment of any consideration
- Whether part of the tax was paid within the fourteen days, which reduces the amount the interest is charged on
- Whether the demand is on the company or on the principal officer, both of whom the section makes liable
In practice
The recurring disputes.
Whether the interest runs on the twenty per cent tax alone or on the tax as increased by surcharge and cess
The section charges interest "on the amount of such tax", and the tax it refers to is the tax on the distributed income referred to in section 115QA(1), which the section itself fixes at twenty per cent. The surcharge and the cess are not in that section at all; they come from section 2 of the Finance Act for the year. For the Revenue, the surcharge sub-section provides that the tax "shall be charged and paid at the rates as specified in those sections and shall be increased by a surcharge", and the cess sub-sections operate on income-tax as increased by the applicable surcharge, so what had to be paid within the fourteen days was the whole figure and interest runs on the whole of what was not paid. For the assessee, the interest provision measures itself by the tax referred to in section 115QA(1), which is the twenty per cent charge, and an interest provision is construed on the base it names rather than on the base of the collection demand. The point is open on the words, and it matters most where the shortfall is confined to the surcharge and cess element, so a computation names the component the interest has been charged on instead of carrying a single figure.
Whether each tranche of consideration starts its own fourteen-day period
Section 115QA(3) requires payment of the tax within fourteen days "from the date of payment of any consideration to the shareholder on buy-back of shares", and a buy-back is frequently paid in tranches. For the Revenue the words are "any consideration", so each payment starts its own fourteen-day period and interest runs separately on the tax attributable to each tranche from the day after that period ends. For the assessee the charge in sub-section (1) is on the distributed income of a buy-back, a figure that can only be struck when the buy-back is complete, and a tranche-by-tranche obligation would require the company to compute distributed income before it knows how many shares will be tendered and accepted. Neither reading is settled by the text. The practical consequence is one of exposure rather than of principle, because on the Revenue's reading interest begins to run on part of the tax well before the buy-back closes, so the dates of each payment of consideration belong on the file whichever reading is advanced.
Whether interest runs where the governing regime itself is in dispute on a straddling buy-back
Where a buy-back was announced before 1 October 2024 and completed after it, whether it took place before the sunset is genuinely open, and a company that treated the buy-back as outside section 115QA will have paid nothing within the fourteen days. For the Revenue that is simply non-payment. The fourteen-day obligation is unconditional and an interest provision that runs from a fixed date does not ask why the tax was not paid, so if the charge is held to apply the interest follows it automatically. For the assessee the liability to interest is parasitic on the liability to tax, so where the charge is held not to apply there is no "such tax" and no date from which interest can run at all; and where the charge is held to apply, the section fixes the start of the period by reference to the last date on which such tax was payable, which presupposes a liability the company was in a position to quantify. The question has not been worked out, and it arises only on the straddling facts. The answer on a straddling file is therefore made on the date the buy-back took place and not on the interest demand.
Whether a recomputation of distributed income carries the interest with it
Interest is computed on the amount of the unpaid tax, so any movement in distributed income moves the interest. That is live on two issues, whether rule 40BB can supply the subtrahend for a buy-back before 1 June 2016, and which Finance Act's surcharge and cess enter the figure. For the Revenue the interest is arithmetic. It attaches to the tax as finally determined, with no separate enquiry of its own, so an increase in distributed income on assessment carries interest from the original fourteenth day. For the assessee interest on an amount the company could not have computed on the materials then available is different in kind from interest on a figure it simply did not pay, and the section fixes the start of the period by reference to the last date on which "such tax" was payable, which presupposes an ascertained figure. It is undecided. What follows on a file is that the interest demand is checked against the distributed income finally held to be chargeable and recomputed where that figure changes.