Mphasis Faces ₹151.73 Cr Tax Demand, Company Plans Appeal

Mphasis Limited announced on March 30, 2026, that it received an order and demand notice from the Income Tax Department for ₹151.73 crore related to Assessment Year 2020-21.
The IT major plans to appeal the order, expressing confidence in a favourable outcome.

The Tax Demand

Mphasis Limited announced on March 30, 2026, that it received an order and demand notice from the Income Tax Department.
The demand notice amounts to ₹151.73 crore for Assessment Year (AY) 2020-21.
The dispute centers on Tax Deducted at Source (TDS) on overseas payments made to foreign associated enterprises, along with associated interest.

Why This Matters

Substantial tax demands can create financial uncertainty for companies and affect investor sentiment. For IT services firms like Mphasis, which handle cross-border transactions and complex payment structures, adhering to TDS regulations on international payments is crucial. Any significant tax liability could impact profitability and cash flows if not successfully contested.

Previous Tax Issues

Mphasis, a prominent player in the Indian IT services sector, has faced tax challenges previously. In April 2025, the company received a tax demand of ₹232.37 crore for FY19-20, also related to TDS on payments to its foreign subsidiaries and associated enterprises. More recently, in March 2026, Mphasis disclosed a demand of ₹2,286.86 crore for AY 2023-24, concerning issues like overseas subcontractor payments without TDS, ESOP expenses, and GST turnover discrepancies. The company has also been involved in transfer pricing disputes concerning the determination of arm's length prices for international transactions with associated entities. These recurring issues highlight ongoing scrutiny of the IT sector's international transactions and tax compliance in India.

What Changes Now

Mphasis is evaluating its legal options to contest the Income Tax Department's order and is preparing to file an appeal.
Management stated its confidence in achieving a favourable outcome, suggesting the matter may not have a material financial impact.

Risks to Watch

The primary risk is the potential failure of Mphasis's appeal against the ₹151.73 crore tax demand. If unsuccessful, the company would be liable to pay the demand amount plus any accrued interest, which could impact its financial performance. The company's confidence that the issue will have no material financial impact relies on a successful appeal.

Peer Comparison

Mphasis operates in the competitive Indian IT services sector alongside giants like TCS, Infosys, and Wipro. These larger IT firms also deal with complex tax regulations and scrutiny on cross-border transactions.

What to Track Next

Investors will monitor Mphasis's progress in filing its appeal against the tax demand order. The outcome of the legal process will be key. Any updates on the company's assessment of financial impact or further clarification from tax authorities will also be important.