Section 115TF: When a Trust or Institution Is Deemed an Assessee in Default

Section 115TF of the Income-tax Act, 1961 provides for recovery when tax on accreted income is not paid. It also creates limited recovery liability for certain recipients of assets transferred on dissolution.

Current-law context: Section 115TF belongs to the Income-tax Act, 1961 and remains relevant to liabilities governed by that Act. From 1 April 2026, the Income-tax Act, 2025 applies under its commencement and transition provisions; the corresponding accreted-income tax and recovery rules are consolidated in Section 352 of the 2025 Act. Always check which Act governs the relevant tax year and event.

Meaning of an assessee in default

An assessee in default is a person whom the law treats as having failed to discharge a statutory tax-payment obligation. This status enables the tax authorities to apply applicable collection and recovery provisions. Under Section 115TF, the default concerns tax on accreted income imposed under Section 115TD.

Section 115TF(1): Liability of the trust, institution and responsible persons

Where the specified person, its principal officer or its trustee fails to pay accreted-income tax in accordance with Section 115TD, the person concerned is deemed to be an assessee in default for the unpaid amount. The Act's provisions governing collection and recovery of income-tax then apply.

The current wording of Section 115TF uses the term specified person, as defined by reference to the Explanation to Section 115TD. The earlier webpage used the narrower historical expression "trust or institution"; the expanded statutory terminology is relevant to registered or approved charitable entities within Section 115TD.

Section 115TF(2): Recovery from a recipient of assets on dissolution

Where accreted-income tax arises because of a failure to transfer assets properly on dissolution under Section 115TD(1)(c), a person receiving an asset included in the accreted-income computation may also be treated as an assessee in default for the relevant tax and interest.

Important limitation: The recipient's liability is limited to the extent to which the asset received is capable of meeting that liability. The provision does not automatically make every asset recipient personally liable without limit.

What is tax on accreted income under Section 115TD?

Section 115TD imposes an additional tax, generally at the maximum marginal rate, on prescribed accreted income when a specified charitable entity undergoes disqualifying conversion, certain mergers or dissolution without qualifying transfer of assets. Accreted income broadly reflects the fair market value of relevant assets less prescribed liabilities, subject to statutory exclusions and valuation rules.

When can Section 115TD be triggered?

Conversion into a form ineligible for the relevant registration or approval, including specified cancellation or non-compliance events.
Merger with an entity that does not meet the statutory requirements, subject to applicable exceptions and provisions.
Failure, on dissolution, to transfer assets to an eligible specified person within the statutory period.

Interest on late payment: Section 115TE

Section 115TE separately provides for simple interest at 1% for every month or part of a month on unpaid accreted-income tax, beginning immediately after the statutory payment deadline and ending on actual payment. Section 115TF addresses default and recovery; it is not itself the charging provision for that interest.

Illustration of limited recipient liability

Assume a dissolved institution has unpaid accreted-income tax and interest of Rs. 12 lakh, and an asset recipient holds a transferred asset capable of meeting only Rs. 4 lakh of that liability. If Section 115TF(2) applies, the recipient's liability under its proviso is limited to the extent the received asset can meet the liability, rather than automatically extending to the entire Rs. 12 lakh. The actual determination depends on the facts and the statutory valuation and recovery rules.

Income-tax Act, 2025: Section 352

The Income-tax Act, 2025 consolidates the rules concerning accreted income, interest and recovery within Section 352. The 2025 Act should be consulted for events governed by the new regime from 1 April 2026, while the 1961 Act and relevant saving or transitional provisions must be considered for earlier matters.

The new provision addresses liability of specified persons and responsible officers or trustees, and also provides for recovery consequences in specified asset-transfer situations. Do not assume that old section numbers apply unchanged to a new tax year.

Practical compliance checklist

Confirm whether the transaction or default falls under the 1961 Act or the 2025 Act.
Check the entity's registration or approval status and whether a triggering event occurred.
Compute accreted income using the prescribed valuation and liability rules.
Identify the applicable tax-payment due date and calculate any delay interest.
Keep documentary evidence of dissolution, asset transfers, recipient details and tax payments.
Review notices and appeal or recovery remedies promptly with a qualified adviser.

Official legal references

Updated: 27 October 2026. This article is general legal information, not advice for a particular assessment, proceeding or transaction.