Stay of demand

20% of tax

The 20% payment rule on challenging a tax order is in accordance with the guideline of the Central Board of Direct Taxes and not part of a statute.

While the ruling on the appeal before the Commissioner of IT (CIT) Appeals may take a long time to come, the 20% payment has to happen soon after a month.

“Assessees may try to buy some time by first writing to the assessing officer (AO).

Once the AO rejects the application, which typically happens immediately, the assessee can move the principal commissioner followed by the chief commissioner.

Normally, if an application is pending before a higher authority, the lower authority will not take any action. But such applications within the tax administration may help the taxpayer delay the 20% payment by only a few weeks..

Here 20% of the demand mean 20% of tax or at the discretion of AO it may be 20% of tax + interest levied as per assessment order.

20% of disputed demand means 20% of tax portion only excluding interest unless the interest portion is under dispute