IIFL Finance Share Price Falls 4% After IIFL Home Finance Faces ₹963 Crore Tax Demand

IIFL Finance Share Price: IIFL Finance shares fell nearly 4% on Tuesday, August 25, after its subsidiary IIFL Home Finance said it plans to challenge a ₹963.39 crore income tax demand raised by the Income Tax Department.

At 12:59 pm, IIFL Finance shares were trading at ₹670.25 on the NSE, down ₹26.15, or 3.75%, from the previous close. The company has a market capitalisation of ₹28,643.03 crore. Despite Tuesday's fall, the stock has gained more than 47% over the past year.

IIFL Home Finance said it has strong legal and factual grounds to contest the assessment and does not expect the tax dispute to affect its operations or planned fundraising.

Speaking to NDTV Profit, Tushar Kotecha, Chief Financial Officer of IIFL Home Finance, said the company will pursue all available legal remedies and remains confident of securing relief at the appellate stage. The demand relates to a block assessment covering the period from April 2018 to February 2025.

IIFL Home Finance Tax Demand: What Is The Dispute About?

According to Kotecha, the assessment primarily concerns the accounting and tax treatment of notional income recognised under IndAS. This includes interest strip accounting, treatment of employee stock option (ESOP) expenses and certain other items.

He said the tax department has raised three or four issues as part of the assessment. On one or two of these, however, the company believes the authorities have not taken into account that the amounts had already been offered for taxation and regular tax had been paid.

IIFL Home Finance therefore believes the additions made in the assessment do not reflect the tax treatment it has followed in earlier years.

Kotecha said the company plans to challenge the assessment through the available appellate channels and expects the process to take around six months to one year.

Despite the size of the demand, he said IIFL Home Finance remains confident of getting relief, adding that the company expects the additions to be deleted at the first appellate authority level.

The company also does not expect the tax matter to affect its fundraising plans or other value-unlocking initiatives at either IIFL Finance or IIFL Home Finance.

Kotecha said the company is in regular discussions with its tax advisers and legal counsel and does not see the dispute delaying or derailing its planned capital-raising initiatives.

He also drew a comparison with a separate tax matter involving IIFL Finance. In that case, the authorities recently reduced the mandatory deposit requirement from 20% to 5% while granting a stay on recovery of the disputed demand.

IIFL Finance had earlier secured a stay on recovery of its separate tax demand after being directed to deposit 5% of the amount under dispute.

Kotecha said IIFL Home Finance expects a similar outcome in its own case as it takes the ₹963.39 crore demand through the appellate process.

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