Director Penalty Notice Template for India

A Director Penalty Notice is a formal warning the Indian tax authorities issue to company directors when their business fails to meet specific tax obligations. It holds directors personally responsible for certain unpaid company taxes, including GST and employee-related payments under the Companies Act, 2013.

Once issued, the notice gives directors 21 days to take action by either paying the debt, putting the company into voluntary administration, or starting the liquidation process. If directors don't respond, they become personally liable for the tax debt - meaning their own assets could be used to pay what the company owes.

Tax authorities issue Director Penalty Notices when companies repeatedly miss tax payments or fail to lodge required returns. Common triggers include unpaid GST, employee superannuation contributions, or PAYG withholding amounts that remain outstanding despite multiple warnings from the tax department.

The Indian Revenue Service typically sends these notices after detecting a pattern of non-compliance or when companies ignore standard collection attempts. They're particularly useful for enforcing tax compliance in cases where businesses continue operating while accumulating tax debts, or when directors appear to be deliberately avoiding their tax obligations under the Companies Act.

• Standard Recovery Notice: Focuses on unpaid tax liabilities, giving directors 21 days to address the company's tax debt
• Lockdown DPN: Issued when directors can't discharge penalties even through voluntary administration or liquidation
• Non-Remittance Notice: Specifically targets unpaid employee-related obligations like TDS or PF contributions
• Parallel Notice: Served simultaneously to multiple directors when shared responsibility exists
• Amended Notice: Updates previous penalties when new information or additional tax obligations surface

• Tax Authorities: Issue and enforce Director Penalty Notices through the Income Tax Department and GST offices
• Company Directors: Primary recipients who become personally liable for unpaid taxes and must respond within the notice period
• Tax Practitioners: Advise directors on compliance obligations and help prepare responses to notices
• Company Secretaries: Monitor corporate compliance and alert directors about potential DPN risks
• Liquidators: Get involved when directors choose liquidation as a response to the notice

• Company Details: Gather accurate corporate information, including registration number, PAN, and registered office address
• Tax Assessment: Calculate precise outstanding tax amounts, including GST, TDS, and other statutory dues
• Director Information: Compile current and former directors' details from the past 12 months
• Compliance History: Document previous tax notices, warnings, and company responses
• Timeline Details: Note specific dates of defaults and payment deadlines
• Notice Format: Use our platform's legally-verified template to ensure all mandatory elements are included correctly

• Official Header: Tax authority letterhead with reference number and date of issue
• Director Details: Full name, DIN, residential address, and period of directorship
• Company Information: Legal name, CIN, registered office address, and PAN
• Tax Liability: Detailed breakdown of outstanding amounts with applicable sections
• Response Timeline: Clear 21-day deadline and available compliance options
• Legal Citations: Relevant sections of Income Tax Act and Companies Act
• Consequences: Explicit statement of personal liability and enforcement measures

A Director Penalty Notice differs significantly from a Notice of Default in both purpose and legal implications. While both are formal warning documents, they serve distinct functions in Indian corporate law.

• Legal Authority: DPNs are issued exclusively by tax authorities under tax laws, while Notices of Default can be issued by any creditor or contractual party
• Personal Liability: DPNs specifically create personal liability for directors regarding tax obligations, whereas Notices of Default address general contractual breaches without automatic personal liability
• Response Timeline: DPNs mandate a strict 21-day response period with specific remedy options, while Notices of Default often allow negotiable cure periods
• Enforcement Scope: DPNs can directly lead to recovery actions against personal assets, but Notices of Default typically require additional legal steps before enforcement