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

Introduction

Section 411 sets the ordinary payment period after a section 289 demand notice, interest for late payment, instalment relief and when an assessee becomes or may be treated as not being in default. A pending appeal does not itself cancel the demand.

Key takeaways

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.

Finance Act 2026: interest on section 439 penalty demands

Under current subsection (3)(b), interest under this subsection is not charged on a demand raised on account of a section 439 penalty up to the order under section 359. Where the assessment or reassessment follows Dispute Resolution Panel directions under section 275, the stated endpoint is the order under section 363.

This specific exception should not be applied automatically to every tax demand or every kind of penalty. Subsection (12), separately, allows the Assessing Officer to treat disputed demand as not in default during the specified appeal, subject to discretion and conditions.

Step-by-step flow for paying a demand notice under Section 411

1. 1

   Is the amount specified in a notice of demand under Section 289?

   Section 411(1) covers any amount payable under a Section 289 notice of demand, other than advance tax.

   • No, or it is advance tax: Section 411(1) does not govern the payment period for it.
   • Yes: Go to the next step.
2. 2

   Work out the payment period

   Pay at the place and to the person named in the notice within 30 days of service (Section 411(1)(a)). A shorter period applies only if the notice specifies it with the previous approval of the Joint Commissioner, where the Assessing Officer believes 30 days would be detrimental to revenue (Section 411(1)(b)). An application to extend time or pay by instalments must be made before that due date (Section 411(5)).

3. 3

   Was the amount paid within the period, or within the time extended under Section 411(5)?

   • Yes, within the Section 411(1) period: The assessee is not in default and no interest arises under Section 411(3).
   • Yes, but only within time extended under Section 411(5): The assessee is not deemed to be in default (Section 411(10)). Interest under Section 411(3) still runs, because it is tied to the Section 411(1) period, not the extended time. Go to the next step.
   • No: The assessee is deemed to be in default (Section 411(10)). If one instalment allowed under Section 411(5) is missed, the whole outstanding amount is in default and the other instalments are treated as due on the same date (Section 411(11)). Go to the next step.
4. 4

   Compute interest under Section 411(3)

   Simple interest at 1% for every month or part of a month, from the day after the payment period ends to the day of payment. No interest on a demand for penalty under Section 439 up to the order under Section 359, or under Section 363 in a Dispute Resolution Panel case (Section 411(3)(b)). No interest for a period where interest is charged on the same amount for the same period under Section 398(3) (Section 411(4)).

5. 5

   Check the reliefs and later changes

   During an appeal under Section 356 or 357 the Assessing Officer may, with conditions, treat the disputed amount as not in default (Section 411(12)). Tax on foreign income that cannot be brought into India because of that country's restrictions is not treated as in default (Section 411(13) and (14)). Later orders listed in Section 411(6) reduce or increase the interest. The Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner may reduce or waive interest if all three conditions in Section 411(7) are met; the order is due within 12 months from the end of the month of application, and a rejection needs a hearing (Section 411(8) and (9)).

Practical checklist

Glossary

Notice of demand

The section 289 notice stating the amount payable and the place and person for payment.

Assessee in default

A payment status that section 411 can attach after the specified or extended time passes without payment.

Frequently asked questions