Section 115P of ITA, 1961 : Section 115P: Interest Payable For Non-Payment Of Tax By Domestic Companies

Explanation using Example

Imagine a domestic company, ABC Pvt. Ltd., declares and distributes dividends to its shareholders on 30th June. According to Section 115-O of the Income-tax Act, 1961, the company is required to pay a Dividend Distribution Tax (DDT) by the 15th of July. However, ABC Pvt. Ltd. fails to pay the DDT by this deadline. As per Section 115P, starting from the 16th of July, ABC Pvt. Ltd. will incur a liability to pay simple interest at the rate of one per cent per month on the unpaid amount of DDT. This interest will accrue until the company pays the tax in full. If ABC Pvt. Ltd. finally pays the tax on the 15th of August, it will have to pay one month's interest for the delay.