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Mphasis Limited’s income-tax demand for Assessment Year (AY) 2023-24 has increased from ₹2,286.86 crore to ₹2,417.80 crore after a Section 154 rectification order. The company said the ₹130.94 crore increase represents interest levied under Section 220 of the Income-tax Act, 1961—not a newly disclosed tax adjustment.
The Assistant Commissioner of Income Tax, Circle 4(1)(1), Bengaluru issued the order on October 9, 2026, and Mphasis received it on October 13. The company disclosed the development in an exchange filing dated October 14.
What changed in Mphasis’ tax demand
| Item | Amount | Context |
|---|---|---|
| Demand before rectification | ₹2,286.86 crore | Amount stated in the earlier AY 2023-24 assessment proceedings |
| Revised demand | ₹2,417.80 crore | Amount in the Section 154 order received in October 2026 |
| Increase | ₹130.94 crore | Difference between the two disclosed demands |
| Stated reason for increase | Section 220 interest | Interest included in the revised computation |
Mphasis’ filing says: “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.”
What the original AY 2023-24 assessment covered
The rectification order follows an assessment order issued under Sections 143(3) and 144B, together with a Section 156 notice of demand. Mphasis’ March 2026 exchange disclosure identified three principal categories of additions:
- Employee stock-option (ESOP) expense: The assessment included an adjustment relating to the expense recorded for employee stock options.
- Payments to overseas associated enterprises: The tax authority questioned subcontractor expenses paid to overseas related entities where tax was allegedly not deducted at source.
- GST and audited turnover mismatch: The assessment compared GST turnover with turnover reported in the audited financial statements and included an adjustment for the difference.
The October rectification filing attributes the higher total specifically to Section 220 interest. It does not describe a new substantive addition to those three categories.
What a Section 154 rectification order means
Section 154 permits the Income Tax Department to correct a “mistake apparent from the record” in an assessment order or in an order issued under Section 154 or by the Centralised Processing Centre. The mechanism is intended for an evident computational or record-based error, rather than a full rehearing of every disputed legal or factual issue.
A taxpayer can submit a rectification request when such an error is identified. The department’s guidance also states that a rectification order can itself be challenged in appeal. Consequently, the revised demand is an administrative tax order that remains subject to Mphasis’ available remedies; it is not, by itself, proof that the company has accepted the underlying additions.
Mphasis’ response and likely next steps
Mphasis said it is evaluating legal remedies and intends to file an appropriate rectification petition addressing errors it has identified in the computation. Its earlier March disclosure said the company was also evaluating an appeal and believed it had a good case on the merits.
- Review the computation: Mphasis will examine how the Section 220 interest was calculated and identify record-based errors.
- Submit a rectification petition: The company plans to ask the tax authority to correct the computation through the Section 154 process.
- Consider an appeal: If the disputed adjustments or rectification outcome remain unresolved, the company can pursue the applicable appellate route. The Income Tax Department expressly recognises an appeal against a rectification order.
The disclosures do not state that an appeal has already been filed, nor do they provide a final decision on any appeal. The company’s position is that it is assessing the available options.
Will the ₹2,417.80 crore demand affect Mphasis’ financial statements?
Management said it does not expect the rectification order to have a material impact on Mphasis’ financial statements. That statement describes the company’s current accounting assessment; it does not cancel the tax demand or determine the outcome of the pending remedies.
The amount also should not be described as a penalty. In the October filing, the incremental ₹130.94 crore is identified as interest under Section 220. The total demand can contain tax and related statutory components arising from the assessment, but the disclosure does not provide a separate rupee split for principal tax, interest and any penalty.
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Why the distinction between demand, interest and final liability matters
- Demand: The amount formally computed in the tax order and notice.
- Interest: A statutory amount that can accrue on unpaid demand; Mphasis attributes the increase to this component.
- Disputed liability: A demand may remain contested through rectification and appeal and therefore is not necessarily the final amount payable after all proceedings.
For readers tracking the case, the key indicators are the outcome of Mphasis’ proposed rectification petition, whether an appeal is filed, and any subsequent order changing the computation or underlying additions.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Timeline of the disclosed proceedings
| Date | Event |
|---|---|
| March 2026 | Mphasis disclosed receipt of the AY 2023-24 assessment order under Sections 143(3) and 144B and a Section 156 demand notice. |
| October 9, 2026 | The Assistant Commissioner of Income Tax, Circle 4(1)(1), Bengaluru issued the Section 154 rectification order. |
| October 13, 2026 | Mphasis received the rectification order. |
| October 14, 2026 | Mphasis disclosed that the demand had been revised to ₹2,417.80 crore because of Section 220 interest. |
What is established—and what is not
It is established that the revised demand is ₹2,417.80 crore for AY 2023-24, up from ₹2,286.86 crore, and that Mphasis attributes the difference to Section 220 interest. It is also established that the company plans a further rectification petition and is considering other legal remedies while expecting no material financial-statement impact.
The disclosures do not establish that Mphasis has paid the full demand, that the tax authority has accepted the company’s objections, or that an appeal has been filed or decided. Those outcomes will depend on subsequent proceedings.
The Bottom Line
Mphasis’ AY 2023-24 income-tax demand rose by ₹130.94 crore to ₹2,417.80 crore after a Section 154 rectification order, with the company identifying Section 220 interest as the reason. Mphasis plans to seek further rectification, is evaluating an appeal and other remedies, and currently expects no material impact on its financial statements.
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