Hindustan Unilever Receives ₹1,986 Crore Tax Demand Notice for FY2020-21: Here’s Why

By Admin

01 Nov, 2025

Introduction
Fast-moving consumer goods (FMCG) major Hindustan Unilever Limited (HUL) has recently come under the tax authorities’ scrutiny. On October 31, 2025, the company revealed through an exchange filing that it had received a ₹1,986 crore tax demand notice from the Mumbai Assistant Commissioner of Income Tax. The notice pertains to the financial year 2020-21, raising questions about certain related party transactions and corporate tax deductions.

Reason Behind the Tax Notice
According to the company’s filing, the demand notice was issued under Section 143(3) read with Section 144C(13) of the Income Tax Act, 1961, accompanied by a Notice of Demand under Section 156.
The tax authorities have challenged the valuation of related party transactions and raised corporate tax disallowances, particularly in the area of depreciation claims. In simpler terms, the department believes some of the payments made to related entities or the value attributed to them were not in line with prescribed norms, leading to a transfer pricing adjustment.

HUL’s Response and Plan of Action
Hindustan Unilever, in its official filing, stated that the company disagrees with the assessment order and plans to file an appeal with the appellate authority within the permissible time frame. The company also emphasized that the tax notice will not have any material impact on its financial position or operational performance.
“The Company will file necessary appeal with the appellate authority in this regard within the permissible timeline,” the statement read.

Impact on HUL’s Share Price
Following the announcement, HUL’s shares closed 0.34% lower at ₹2,461.20 on Friday, compared to the previous close of ₹2,469.60. The filing was made public after market hours. Despite the short-term dip, HUL’s stock has been a strong long-term performer, delivering over 18% returns in the last five years.
However, in the past one year, the stock has fallen 2.65%, while on a year-to-date (YTD) basis, it has gained 5.99% in 2025. In the last one month, shares are down 2.12%, and over the past five sessions, they have slipped 2.25%.

52-Week Performance and Market Cap
The company’s stock touched a 52-week high of ₹2,750 on September 4, 2025, and a 52-week low of ₹2,136, according to NSE data. As of October 31, 2025, HUL’s market capitalisation stood at over ₹5.78 trillion, underscoring its status as one of India’s most valuable FMCG companies.

Conclusion
While the ₹1,986 crore tax demand notice has raised concerns, Hindustan Unilever’s management remains confident in its financial standing and legal approach. The company’s proactive step to appeal the notice reflects its belief in compliance and transparency. Investors, meanwhile, should watch for further updates as the appeal process unfolds, as such regulatory developments can influence short-term stock movements.

Disclaimer: This article is for educational purposes only. The views and recommendations mentioned are those of market analysts or brokerages and do not constitute investment advice. Investors are advised to consult certified financial experts before making investment decisions, as market dynamics can change rapidly.