Section 115TF of Income Tax Act 1961: When Specified Person Is Deemed Assessee in Default
Section 115TF deals with recovery consequences where tax on accreted income is not paid as required under Section 115TD. It identifies who is treated as an assessee in default and, in specified asset-transfer cases, limits the recipient's liability to the value of the asset available to meet that liability.
- It operates when tax on accreted income payable under Section 115TD is not paid.
- The principal officer or trustee and the specified person may be treated as an assessee in default.
- Collection and recovery provisions of the Income-tax Act then apply.
- For a transfer covered by Section 115TD(1)(c), the recipient of an asset included in accreted income may also be treated as an assessee in default.
- The recipient's liability is restricted to the extent to which the asset received can meet the liability.
Meaning and purpose of Section 115TF
Section 115TF forms part of the special regime dealing with tax on the accreted income of certain charitable or religious entities. The provision is a recovery rule: once tax on accreted income becomes payable under Section 115TD and is not paid, Section 115TF determines who may be treated as an assessee in default.
The expression used in the later version of Section 115TF is "specified person". The Finance Act, 2022 substituted this expression for the earlier references to a "trust or institution" with effect from 1 April 2023. For Section 115TF, "specified person" takes its meaning from clause (iia) of the Explanation to Section 115TD.
Section 115TF(1): default by specified person
In substance, sub-section (1) provides that where the principal officer or trustee of the specified person and the specified person fail to pay tax on accreted income in accordance with Section 115TD, the person concerned is deemed to be an assessee in default for the unpaid tax. The Act's collection and recovery machinery then applies.
The practical effect is that non-payment is not merely an outstanding tax balance. The statutory status of "assessee in default" activates the applicable recovery provisions of the Act.
Section 115TF(2): liability of recipient of transferred asset
Sub-section (2) begins with a non-obstante clause and deals specifically with tax payable in the circumstances referred to in Section 115TD(1)(c). Where an asset forming part of the computation of accreted income under Section 115TD(2) has been transferred to another person, that recipient can be deemed an assessee in default for the relevant tax and interest.
The proviso is important: the recipient's liability is limited to the extent to which the asset received is capable of meeting the liability. The provision therefore links recovery from the recipient to the asset that came into that person's hands.
How Sections 115TD, 115TE and 115TF work together
| Provision | Function under the 1961 Act |
|---|---|
| Section 115TD | Creates the charge on accreted income and sets out the circumstances and payment framework. |
| Section 115TE | Provides for interest where the whole or part of the tax on accreted income is not paid within the permitted time. |
| Section 115TF | Deems the relevant person to be an assessee in default and applies collection and recovery provisions. |
Example
Suppose a specified person is required under Section 115TD to pay tax on accreted income but the tax remains unpaid. Section 115TF(1) may treat the relevant principal officer or trustee and the specified person as an assessee in default. If the liability arises in a case covered by Section 115TD(1)(c) and an asset included in the accreted-income computation was transferred to another person, Section 115TF(2) can extend the default consequence to that recipient, subject to the statutory limit based on the asset received.
Law applicable from 1 April 2026
The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026 for Tax Year 2026-27 onward. The new Act reorganises and renumbers the law. Its accreted-income provisions for registered non-profit organisations are principally found in Section 352. Consequently, Section 115TF should not be presented as the operative section for a Tax Year beginning on or after 1 April 2026.
For an older assessment year, proceeding, liability or other saved matter, the repeal and savings provisions must be checked before deciding which enactment governs the issue.
Frequently asked questions
What does "assessee in default" mean in Section 115TF?
For this provision, it means that the person specified by Section 115TF is treated as being in default for the unpaid tax on accreted income, allowing the Act's collection and recovery provisions to operate.
Does Section 115TF apply only to the trust or institution itself?
No. Depending on the statutory circumstances, the provision also addresses the principal officer or trustee and, under sub-section (2), a person who received an asset forming part of the computation of accreted income.
Is the asset recipient liable without limit?
No. Section 115TF(2) expressly limits that recipient's liability to the extent to which the asset received is capable of meeting the liability.
Is Section 115TF the current provision for Tax Year 2026-27?
No. For Tax Year 2026-27 onward, the Income-tax Act, 2025 applies. The corresponding accreted-income framework is principally in Section 352 of that Act. Section 115TF remains relevant where the 1961 Act continues to govern because of the relevant period or the repeal and savings rules.
This article is an explanatory legal reference. The applicable enactment, tax period, amendments, notifications and facts should be checked for a particular case.