IIFL Finance shares decline over 7% after home finance arm receives ₹963 crore income tax demand notice; here's why

IIFL Finance share price declined more than 7% during the morning market hours on Tuesday, August 25, as investors focused on the company receiving a ₹963 crore income tax demand notice from the Assistant Commissioner of Income Tax, Mumbai, after a search and seizure action.

After trading lower during the pre-market hours on NSE, non-banking financial company (NBFC) IIFL Finance shares declined 7.5% to touch an intraday low of ₹643.55 apiece on Tuesday’s market, in comparison to ₹696.40 apiece at the previous equity market close.

From overriding commissions, deductions claimed, ESPO expenses, to interest strip assets, the company received the income tax notice from the authorities demanding funds on these grounds.

However, the company believes that it has substantial factual and legal grounds, based on which it seeks to contest the tax notice which was received on Monday evening, August 24, 2026.

What is the ₹963 crore notice?

After a block assessment for the period between April 1, 2018 and February 3, 2025, resulting from the search and seizure action carried out on IIFL Finance and its subsidiaries, the tax department imposed a ₹963.39 crore income tax demand from the company’s leading subsidiary.

NSE filing showed that IIFL Home Finance, one of the major subsidiaries of IIFL Finance, will have to pay ₹963.39 crore in taxes, which includes the surcharge and cess levied during the period.

As per the IT department's notice, the breakdown highlights a ₹490 crore impact due to overriding commission (ORC) income, a ₹305 crore impact due to deductions claimed under section 36(1)(viii) of the Income Tax Act, 1961, a ₹392 crore impact from interest strip assets, and a ₹53 crore impact from ESOP expenses.

What did the company say?

Along with the intention to contest the tax demand order, IIFL Finance, in its exchange filing, provided its reasoning and grounds under each section which the firm will use to make its case.

This means the company claims that the tax for the period has been paid earlier in the previous years, and the latest demand notice creates an alleged double tax demand levied on the company.

This means IIFL claims that, as per the Income Tax laws, housing finance companies can claim a tax deduction; however, the same is capped with a statutory ceiling on how much can be claimed.

Hence, the company claims the deductions claimed were within the allowed legal threshold.

Shares gain 20% in one month

Despite the decline during Tuesday’s trading session, IIFL Finance shares were up nearly 8% in the last five days and have delivered more than 20% returns to investors in the past one-month period, according to NSE data.

On a YTD basis, the shares have risen 8.3%, 46% in the last one year, 18% in the last three years, and have given more than 147% returns on investment in the last five-year period, as per the exchange data.

The NBFC firm’s market capitalisation (m-cap) was at ₹28,570 crore as of the trading session on Tuesday, August 25, 2026.