Section 115QC and Section 115R of Income Tax Act: Meaning and Current Status
Sections 115QC and 115R belonged to special regimes under the Income-tax Act, 1961 dealing respectively with default in payment of tax on distributed income arising from company buy-back and additional tax on income distributed to unit holders. Their practical application now depends on the relevant period because the law has materially changed.
Section 115QC: When a company is deemed to be an assessee in default
Section 115QC of the Income-tax Act, 1961 formed part of Chapter XII-DA, which dealt with tax on distributed income of domestic companies in specified buy-back cases. It operated with Section 115QA.
Meaning of Section 115QC
If the principal officer of a domestic company and the company failed to pay the tax on distributed income required under Section 115QA, the principal officer or the company, as applicable, was deemed to be an assessee in default for the unpaid tax. The Act's collection and recovery provisions then applied to that amount.
What does "assessee in default" mean here?
In this context, the expression describes the statutory consequence of failing to pay the tax required by the linked charging provision. Section 115QC did not independently create the buy-back tax; it provided the default and recovery consequence where tax payable under Section 115QA was not paid.
Section 115R: Tax on distributed income to unit holders
Section 115R of the Income-tax Act, 1961 was part of Chapter XII-E. Historically, it imposed additional income-tax on specified income distributed by the Unit Trust of India, specified companies or Mutual Funds to unit holders, subject to the conditions, rates and exceptions applicable for the relevant period.
The uploaded version of this page reproduces the historical rate structure and expressly refers to distributions by specified companies or Mutual Funds made on or before 31 March 2020. That date is important: the old distribution-tax regime should not be presented as though those rates continue to govern present-day distributions.
Historical structure of Section 115R
| Provision | Historical effect |
|---|---|
| Section 115R(1) | Applied to specified distributions by the Unit Trust of India under the historical regime. |
| Section 115R(2) | Applied additional income-tax to specified distributions by a specified company or Mutual Fund, subject to the applicable cut-off date, rates and exceptions. |
| Section 115R(2A) | Provided a grossing-up mechanism for determining additional income-tax under the distribution-tax regime. |
| Section 115R(3) | Required payment of the tax to the credit of the Central Government within the period prescribed by the provision. |
| Section 115R(4) | Denied deduction for the distributed income charged to tax under the specified sub-sections. |
Current legal position in 2026
India moved to the Income-tax Act, 2025 for Tax Year 2026-27 onwards. The Income Tax Department's transition guidance distinguishes this from liabilities relating to Assessment Year 2026-27 and earlier, for which the Income-tax Act, 1961 continues to be selected on the e-Filing portal.
For the new Act, the Department expressly states that the old payment categories for tax on distributed income to unit holders and tax on distributed income of a domestic company for buy-back under Section 115QA have been omitted and are not applicable.
Accordingly, Sections 115QC and 115R remain important for understanding the historical law, earlier transactions, outstanding demands and litigation arising under the Income-tax Act, 1961, but they should not be treated as current charging provisions for Tax Year 2026-27 onwards.
Legacy liabilities and tax payments
The e-Filing portal continues to support payments relating to earlier periods under the Income-tax Act, 1961. Its current challan guidance lists "Tax on Distributed Income to Unit Holders (107)" among payment options for AY 2026-27 or prior years. This is relevant where a valid historical liability or outstanding demand survives even though the levy is not part of the current 2025 Act payment framework.
Before making a legacy payment, the taxpayer should identify the transaction date, applicable assessment year, demand reference and the law then in force. Historical provisions have been amended several times, so an old rate should not be applied merely because it appears in an earlier version of Section 115R.
Important terms and definitions
Domestic company
For Section 115QC, the expression must be understood in the context of the Income-tax Act, 1961 and the linked Section 115QA regime applicable to the relevant period.
Principal officer
The expression is a defined concept under the Income-tax Act and is relevant because Section 115QC could attach the statutory default consequence to the principal officer as well as the domestic company where the linked tax was not paid.
Mutual Fund and specified company
Section 115R used these expressions within its special distribution-tax framework. Their precise meaning and the applicable exclusions depended on the statutory definitions and the version of the provision in force for the distribution concerned.
Distributed income
For these provisions, distributed income was a statutory tax concept governed by the relevant special chapter. It should not be assumed to have the same tax treatment under the current Income-tax Act, 2025.
Official references
For current compliance and transition rules, refer to the Income Tax Department general questions on the Income-tax Act, 2025 and the official challan creation guidance. For the text and historical structure of the Income-tax Act, 1961, refer to India Code.
Updated: 28 September 2026. This article explains the statutory position generally. For a transaction, demand or dispute, verify the law applicable to the relevant tax period and facts.