Section 411: payment of demand notice, interest for delay, and default

Time to pay a demand notice - Section 411(1) and (2)

"Any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 289 at the place and to the person mentioned in the notice shall be paid within-- (a) thirty days of the service of the notice; or (b) such period being a period less than thirty days, as specified in the notice with the previous approval of the Joint Commissioner, where the Assessing Officer has any reason to believe that it shall be detrimental to revenue if the full period of thirty days is allowed."

Where an appeal or other proceeding is filed or initiated against the notice, the demand still remains valid until the appeal is disposed of by the last appellate authority or the proceeding is disposed of, and the notice continues to have effect as provided in Section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964.

Interest for late payment of the demand - Section 411(3)

"If the amount specified in any notice of demand under section 289 is not paid within the period specified under sub-section (1)-- (i) the assessee shall be liable to pay simple interest at 1% for every month or part of a month comprised in the period; and (ii) such period shall commence from the day immediately following the end of the period mentioned in sub-section (1) and end with the day on which the amount is paid."

No interest is charged under this sub-section on a demand raised on account of a penalty levied under Section 439, up to the date of the order under Section 359, or up to the date of the order under Section 363 where the assessment or reassessment followed directions of the Dispute Resolution Panel under Section 275.

No interest is charged under Section 411(3) on any amount for any period where interest is already charged on the same amount for the same period under Section 398(3), on the tax specified in the intimation issued under Section 399.

Extension of time and instalment payment - Section 411(5)

Section 411(3) does not prevent the Assessing Officer from extending the time for payment, or allowing payment in instalments, subject to conditions he thinks fit, if the assessee applies for this before the due date under Section 411(1) expires.

Adjustment of interest on appeal, and waiver in hardship cases

Where an appellate or revisional order under Section 287, 288, 359, 363, 365(10), 368, 378, or an order of the Settlement Commission under Section 245D(4) of the Income-tax Act, 1961, reduces the amount on which interest was payable, the interest is reduced accordingly and any excess interest paid is refunded. If the amount is later increased as a result of a further order (including under Section 377), the assessee becomes liable to interest on the increased amount from the day after the period mentioned in the first notice of demand until the amount is paid.

The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may, on the assessee's application, reduce or waive the Section 411(3) interest if satisfied that: (a) payment has caused or would cause genuine hardship; (b) the default was due to circumstances beyond the assessee's control; and (c) the assessee has co-operated in the relevant inquiry or recovery proceeding. An order on such an application - allowing or rejecting it, wholly or partly - must be passed within twelve months from the end of the month in which the application was received, and a rejection cannot be passed without giving the assessee an opportunity of being heard.

When the assessee is deemed to be in default

If the amount is not paid within the time specified under Section 411(1), or as extended under Section 411(5), at the place and to the person mentioned in the notice, the assessee is deemed to be in default.

Where instalment payment has been allowed under Section 411(5) and the assessee defaults on any one instalment within the fixed time, the assessee is deemed to be in default as to the whole outstanding amount, and the remaining instalments are treated as having fallen due on the same date as the defaulted one.

Where an assessee has filed an appeal under Section 356 or 357, the Assessing Officer may, at his discretion and subject to conditions, treat the assessee as not in default for the disputed amount even though the payment time has expired, until the appeal is disposed of.

Income arising outside India that cannot be remitted

Where an assessee has been assessed on income arising outside India in a country that prohibits or restricts remittance of money to India, the Assessing Officer must not treat the assessee as in default for the part of the tax attributable to that income, for as long as the prohibition or restriction remains. Income is deemed to have been "brought into India" if it has been utilised (or could have been utilised) for expenditure the assessee actually incurred outside India, or if the income - capitalised or not - has actually been brought into India in any form.

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