Section 220 of the Income-tax Act, 1961: When Tax Is Payable and When an Assessee Is in Default
Section 220 sets out the time for paying an income-tax demand, the consequences of delay, the scope for instalments or interest waiver, and the treatment of disputed demands during an appeal.
When must a tax demand be paid?
Under section 220(1), an amount specified in a notice of demand issued under section 156, other than advance tax, is ordinarily payable within 30 days after service of the notice. If the Assessing Officer believes that allowing the full period would be detrimental to revenue, a shorter period may be directed with the previous approval required by the provision.
Section 156 concerns service of a notice of demand specifying tax, interest, penalty, fine or other sum payable in consequence of an order under the Act. The notice, underlying order and any subsequent modification should be checked together.
Interest for late payment: Section 220(2)
Where the demanded amount is not paid within the permitted time, section 220(2) generally provides for simple interest at 1% for every month or part of a month, starting on the day immediately after the payment period ends and continuing until payment. Statutory provisions address adjustment where the underlying demand is reduced or subsequently increased.
| Issue | General position under section 220 |
|---|---|
| Ordinary payment time | 30 days from service of a section 156 notice |
| Interest on overdue demand | 1% simple interest for every month or part of a month |
| Extension or instalments | Assessing Officer may permit on a timely application, subject to conditions |
| Default | May arise when payment is not made by the applicable due date |
| Disputed demand | Appeal does not automatically suspend collection; relief may be sought under section 220(6) |
Illustration: If an unpaid demand of Rs. 50,000 attracts section 220(2) interest for two months or parts of months, the basic illustration is Rs. 50,000 x 1% x 2 = Rs. 1,000. The actual calculation depends on the precise dates, amounts paid, changes to demand and applicable law.
Extension, instalments and waiver of interest
Section 220(3): Time extension or payment by instalments
An assessee may apply before expiry of the original payment period for additional time or instalment payment. The Assessing Officer has discretion to grant relief subject to conditions. A request alone does not establish that payment has been deferred.
Section 220(2A): Reduction or waiver of interest
The competent Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner may reduce or waive interest under section 220(2), where the statutory conditions are met, including genuine hardship, circumstances beyond the assessee's control causing default, and cooperation with assessment or recovery proceedings. The provision also contains procedural safeguards and time limits for disposal of applications.
Does an appeal stop recovery?
No, not automatically. Under section 220(6), where an appeal has been presented, the Assessing Officer may, subject to conditions, treat the assessee as not being in default in respect of the disputed amount while the appeal remains pending. The assessee should make a reasoned stay request and examine relevant CBDT instructions and judicial orders. The mere filing of an appeal does not itself erase the demand.
Section 220 explained: Subsections and legal effect
- 220(1): Ordinary time for payment of a notice of demand and power to specify a shorter time with approval.
- 220(1A): Continuity and validity of demand during appeal or other proceedings, read with the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964.
- 220(2): Interest on delayed payment and statutory adjustments following modification of demand.
- 220(2A): Discretionary reduction or waiver of interest on fulfilment of prescribed conditions.
- 220(2B) and 220(2C): Protection against overlapping interest for the same amount and period in specified TDS/TCS processing situations.
- 220(3): Application for extension of payment time or instalments.
- 220(4): Assessee deemed in default for non-payment within the allowed period.
- 220(5): Default in one permitted instalment can accelerate the whole outstanding amount.
- 220(6): Discretion to treat disputed appellate demand as not in default while appeal is pending.
- 220(7): Special treatment of foreign-source income where local law restricts remittance to India, including the statutory explanation.
Practical steps after receiving a tax demand
- Check the demand notice under section 156, the assessment or intimation and the date of service.
- Reconcile payments, TDS, TCS, advance tax and self-assessment tax credits with the relevant records.
- If the demand is correct, pay within the applicable period and retain the challan.
- If there is a mistake, use the appropriate rectification or appeal procedure within its own limitation period.
- If payment is difficult, apply promptly for instalments, extension or other legally available relief.
- If the demand is disputed, seek an appropriate stay rather than assuming an appeal automatically prevents recovery.
Official legislation and guidance
- Income Tax Department: Income-tax Act, 1961 (consult section 220 and section 156).
- Income Tax e-Filing Portal (outstanding demand, payment and grievance services).
- India Code: Central legislation (search the Income-tax Act, 2025 and relevant transition provisions).
- Income Tax Department (CBDT circulars, instructions and legislative updates).
Legal information only. The law applicable to a particular notice depends on its dates, statutory regime and subsequent orders. Confirm the current text and any applicable notifications before acting.
Read the original statutory extract and historical amendment notes
(1) Any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 156 shall be paid within 1 thirty days of the service of the notice at the place and to the person mentioned in the notice :
Provided that, where the 2 Assessing Officer has any reason to believe that
it will be detrimental to revenue if the full period of 1 thirty days aforesaid
is allowed, he may, with the previous approval of the 3 Joint Commissioner,
direct that the sum specified in the notice of demand shall be paid within such
period being a period less than the period of 1 thirty days aforesaid, as may be
specified by him in the notice of demand.
4 (1A) Where any notice of demand has been served upon an assessee and any
appeal or other proceeding, as the case may be, is filed or initiated in respect
of the amount specified in the said notice of demand, then, such demand shall be
deemed to be valid till the disposal of the appeal by the last appellate
authority or disposal of the proceedings, as the case may be, and any such
notice of demand shall have the effect as specified in section 3 of the Taxation
Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 (11 of
1964).
(2) If the amount specified in any notice of demand under section 156 is not paid within the period limited under sub-section (1), the assessee shall be liable to pay simple interest at 5 6 one per cent. for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in sub-section (1) and ending with the day on which the amount is paid:
7 Provided that, where as a result of an order under section 154, or section 155, or section 250, or section 254, or section 260, or section 262, or section 264 8 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under this section had been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded:
9 Provided further that where as a result of an order under sections specified in the first proviso, the amount on which interest was payable under this section had been reduced and subsequently as a result of an order under said sections or section 263, the amount on which interest was payable under this section is increased, the assessee shall be liable to pay interest under sub-section (2) from the day immediately following the end of the period mentioned in the first notice of demand, referred to in sub-section (1) and ending with the day on which the amount is paid:
8 10 Provided also that in respect of any period commencing on or before the 31st day of March, 1989 and ending after that date, such interest shall, in respect of so much of such period as falls after that date, be calculated at the rate of one and one-half per cent for every month or part of a month.
11 (2A) Notwithstanding anything contained in sub-section (2), 12 the 13 14 Principal Chief Commissioner or Chief Commissioner or 15
Principal Commissioner or Commissioner may reduce or waive the amount of 10interest paid or payable by an assessee under the said sub-section if, 16he is satisfied that-
(i) payment of such amount 17has caused or would cause genuine hardship to the assessee;
(ii) default in the payment of the amount on which 18interest has been paid or was payable under the said sub-section was due to circumstances beyond the control of the assessee; and
(iii) theassessee has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him:
19Provided that the order accepting or rejecting the application of the assessee, either in full or in part, shall be passed within a period of twelve months from the end of the month in which the application is received:
Provided further that no order rejecting the application, either in full or in part, shall be passed unless the assessee has been given an opportunity of being heard: Provided also that where any application is pending as on the 1st day of June, 2016, the order shall be passed on or before the 31st day of May, 2017.
20 (2B) Notwithstanding anything contained in sub-section (2), where interest is charged under subsection (1A) of section 201 on the amount of tax specified in the intimation issued under sub-section (1) of section 200A for any period, then, no interest shall be charged under sub-section (2) on the same amount for the same period.
22 (2C) Notwithstanding anything contained in sub-section (2), where interest is charged under subsection (7) of section 206C on the amount of tax specified in the intimation issued under sub-section (1) of section 206CB for any period, then, no interest shall be charged under sub-section (2) on the same amount for the same period.
(3) Without prejudice to the provisions contained in sub-section (2), on an application made by the assessee before the expiry of the due date under sub-section (1), the 23 Assessing Officer may extend the time for payment or allow payment by instalments, subject to such conditions as he may think fit to impose in the circumstances of the case.
(4) If the amount is not paid within the time limited under sub-section (1) or extended under subsection (3), as the case may be, at the place and to the person mentioned in the said notice the assessee shall be deemed to be in default.
(5) If, in a case where payment by instalments is allowed under sub-section (3), the assessee commits defaults in paying any one of the instalments within the time fixed under that sub-section, the assessee shall be deemed to be in default as to the whole of the amount then outstanding, and the other instalment or instalments shall be deemed to have been due on the same date as the instalment actually in default.
(6) Where an assessee has presented an appeal under section 246 24 or section 246A the 22 Assessing Officer may, in his discretion and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as such appeal remains undisposed of.
(7) Where an assessee has been assessed in respect of income arising outside India in a country the laws of which prohibit or restrict the remittance of money to India, the 22 Assessing Officer shall not treat the assessee as in default in respect of that part of the tax which is due in respect of that amount of his income which, by reason of such prohibition or restriction, cannot be brought into India, and shall continue to treat the assessee as not in default in respect of such part of the tax until the prohibition or restriction is removed.
Explanation.-For the purposes of this section, income shall be deemed to have been brought into India if it has been utilised or could have been utilised for the purposes of any expenditure actually incurred by the assessee outside India or if the income, whether capitalised or not, has been brought into India in any form.
Historical amendment notes
1 Subs. by s. 85, ibid.,for "thirty-five days" (w.e.f.
1-4-1989).
2. Subs. by s. 2, ibid.,for "Income-tax Officer" (w.e.f. 1-4-1988).
3. Subs. by Act 21 of 1998, s. 3, for "Deputy Commissioner" (w.e.f. 1-10-1998).
Earlier the quoted words were substituted by Act 4 of 1988, s. 2, for
"Inspecting Assistant Commissioner" (w.e.f. 1-4-1988).
4. Ins. by Act 25 of 2014, s. 64 (w.e.f. 1-10-2014). 5. Subs. by Act 4 of 1988,
s. 85 for "fifteen per cent. per annum from the day commencing after the end of
the period mentioned in sub-section (1)" (w.e.f. 1-4-1989).
6 Subs. by Act 54 of 2003, s. 10, for "one and one-fourth per cent." (w.e.f.
8-9-2003). Earlier the quoted words were subs.
by Act 14 of 2001, s. 76, for "one and one-half per cent." (w.e.f. 1-6-2001).
7. Ins. by Act 13 of 1963, s. 14 (w.r.e.f. 1-4-1962).
8. Ins. by Act 4 of 1988, s. 85 (w.e.f. 1-4-1989).
9 Ins. by Act 25 of 2014, s. 64 (w.e.f. 1-10-2014).
10. Subs. by s. 64, ibid.,for "Provided further" (w.e.f. 1-10-2014).
11. Ins. by Act 67 of 1984, s. 37 (w.e.f. 1-10-1984).
12 Subs. by Act 46 of 1986, s. 13, for "the Board may" (w.e.f. 1-4-1987).
13 Subs. by Act 4 of 1988, s. 2, for "Commisssioner" (w.e.f. 1-4-1988).
14. Subs. by Act 25 of 2014, s. 4, for "Chief Commissioner" (w.r.e.f. 1-6-2013).
15. Subs. by s. 4, ibid.,for "Commisssioner" (w.r.e.f. 1-6-2013).
16. Subs. by Act 46 of 1986, s. 13, for "interest payable by an assessee" (w.r.e.f.
1-10-1984).
17. Subs. by s. 13, ibid.,for "on the recommendation made by the Commissioner in
this behalf, if is satisfied" (w.e.f. 1-4- 1987).
18. Subs. by s. 13, ibid.,for "would cause genuine hardship" (w.r.e.f.
1-10-1984).
19. Subs. by s. 13, ibid., for "interest was payable" (w.r.e.f. 1-10-1984).
20. Ins. by Act 28 of 2016, s. 90 (w.e.f. 1-6-2016).
21. Ins. by Act 23 of 2012, s. 84 (w.e.f. 1-7-2012).
22. Ins. by Act 20 of 2015, s. 56 (w.e.f. 1-6-2015).
23. Subs. by Act 4 of 1988, s. 2, for "Income-tax Officer" (w.e.f. 1-4-1988).
24. Ins. by Act 10 of 2000, s. 62 (w.e.f. 1-6-2000).