Infosys Ltd, the second-largest software services provider in India, is poised to receive a significant tax refund totaling Rs 6,329 crore from the income tax department. However, the company is also grappling with a substantial tax liability amounting to Rs 2,763 crore, as per assessment orders issued.
In response to these developments, Infosys released a statement to the exchanges, indicating that it is currently assessing the implications of these orders on its financial statements for the quarter and year ending March 31, 2024. The assessment orders are issued under various sections of the Income Tax Act, 1961, and the refunds, inclusive of interest, pertain to assessment years spanning from 2007-08 to 2018-19.
Conversely, the tax liability pertains specifically to the assessment year 2022-23, inclusive of interest. Furthermore, for the assessment year 2011-12, Infosys is faced with a tax demand of Rs 4 crore, including interest. In the fiscal year 2022-23, the company reported consolidated income tax expenses amounting to Rs 9,214 crore, compared to Rs 7,964 crore in the preceding fiscal year. The income tax expense encompasses both current and deferred income tax.
In the quarter ended December, Infosys recorded over Rs 2,500 crore as income tax expense. The impact of these assessment orders extends beyond the parent company, as Infosys subsidiaries have also received assessment orders from the income tax department. Collectively, these orders entail a tax demand of Rs 277 crore, inclusive of interest, for assessment years spanning from 2018-19 to 2021-23.
The company, headquartered in Bengaluru, is currently evaluating the implications of these assessment orders on its financial statements and is considering filing appeals against these orders. Additionally, one of Infosys’ units is slated to receive refund orders under various sections of the Income Tax Act, amounting to Rs 14 crore, for assessment years 2007-09 and 2016-17.
Infosys follows a policy where current income tax for current and prior periods is recognized based on the amount expected to be paid to or recovered from the tax authorities, utilizing the applicable tax rates and laws enacted or substantively enacted by the Balance Sheet date. This is reiterated in the company’s financial statements provided each quarter.
In summary, while Infosys is set to receive a substantial tax refund, it also faces a significant tax liability, prompting the company to carefully evaluate the implications of these assessment orders on its financial standing and consider potential appeals against the orders issued.
