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Scan for outdated or missing drivers - takes under a minuteDriver Scan →Repair Windows errors before they cause bigger problemsFix Now →Mphasis Limited’s income-tax demand for Assessment Year (AY) 2023-24 has increased to ₹2,417.80 crore from ₹2,286.86 crore after the Bengaluru tax department issued a rectification order. Mphasis attributed the ₹130.94 crore increase to interest charged under Section 220 of the Income-tax Act, 1961, rather than to a newly disclosed tax adjustment.
What changed in Mphasis’ tax demand
The Assistant Commissioner of Income Tax, Circle 4(1)(1), Bengaluru, issued the Section 154 rectification order on October 9, 2026. Mphasis received it on October 13 and disclosed it on October 14.
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| Item | Amount |
|---|---|
| Demand before rectification | ₹2,286.86 crore |
| Revised demand | ₹2,417.80 crore |
| Increase | ₹130.94 crore |
| Stated reason for increase | Interest under Section 220 |
In its exchange filing, the company said: “Pursuant to the said rectification order, the demand has been revised from ₹2,286.86 crore to ₹2,417.80 crore on account of interest levied under section 220 of the income tax Act.”
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Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →What is a Section 154 rectification order?
Section 154 allows the income-tax authorities to correct a mistake that is apparent from the record in an assessment order or in an order issued through the Centralised Processing Centre. It is intended for correcting an evident computational or record-based error, not for conducting a full rehearing of every disputed issue.
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The Income Tax Department’s procedural guidance also states that a taxpayer can submit a rectification request when such an apparent mistake exists and can appeal against a rectification order. That means the revised figure is an administrative tax demand at this stage, not a final judicial determination of Mphasis’ underlying disputes.
How the original AY 2023-24 assessment arose
Mphasis’ March 2026 exchange disclosure said the company had received an assessment order under Sections 143(3) and 144B, together with a Section 156 notice of demand, for AY 2023-24. The assessment included several additions:
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- Employee stock-option (ESOP) expense: an adjustment relating to the company’s accounting or tax treatment of ESOP costs.
- Payments to overseas associated enterprises: subcontractor expenses paid to related entities outside India, where the assessing authority alleged that tax should have been deducted at source.
- GST-turnover differences: a difference between turnover reported for GST purposes and turnover shown in the audited financial statements.
The March filing said Mphasis was evaluating an appeal and believed it had a good case on the merits. The October rectification disclosure concerns the calculation of the demand, specifically the additional Section 220 interest.
Will the demand affect Mphasis’ financial statements?
Mphasis said it does not expect the rectification order to have a material impact on its financial statements. That statement reflects management’s current assessment; it does not cancel the demand or resolve the tax authority’s claims.
The company is evaluating legal remedies and intends to file an appropriate rectification petition for errors it has identified in the computation. It is also considering other available proceedings, including an appeal in relation to the assessment dispute.
What happens next?
- Review the computation: Mphasis will examine how the Section 220 interest was calculated and identify the errors it says appear in the demand computation.
- Submit a rectification petition: The company plans to request correction of those apparent errors through the statutory rectification process.
- Consider an appeal: An appeal can be filed against a rectification order, and Mphasis has said it is evaluating the appropriate legal route.
- Manage the outstanding demand: The tax demand remains part of the company’s tax dispute while these remedies are considered. The disclosures do not state that the amount has been finally paid or that recovery has been stayed.
Why the headline amount can rise without a new principal-tax adjustment
Section 220 governs payment of tax demanded in a notice and can generate interest when the statutory payment conditions are not met. Consequently, a rectification order can increase the total amount payable even when the underlying additions are unchanged. In Mphasis’ disclosure, the movement from ₹2,286.86 crore to ₹2,417.80 crore is expressly linked to that interest component.
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What investors should watch
- The company’s proposed rectification petition and the tax authority’s response.
- Whether Mphasis files an appeal against the assessment or rectification order, and whether any recovery protection is granted.
- Any later disclosure changing management’s assessment of financial-statement impact.
- Further details on the ESOP, overseas subcontractor-tax deduction and GST-turnover issues if proceedings progress.
The Bottom Line
Mphasis’ AY 2023-24 income-tax demand is now ₹2,417.80 crore, up ₹130.94 crore because of Section 220 interest. The company plans to challenge computation errors through rectification and is evaluating further legal remedies, while currently expecting no material impact on its financial statements.
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