The Income Tax department has frozen Cognizant Technology Solutions Corp's bank accounts and deposits in Chennai and Mumbai for allegedly evading a dividend distribution tax (DDT), according to a report on Tuesday.
A Cognizant spokesman confirmed the report and said in a statement that a court has instructed the tax department not to take further action pending further hearings.
Cognizant failed to pay the tax of more than 25 billion rupees ($385 million) in the 2016-17 financial year, the Hindu newspaper reported, citing officials from the tax department.
Cognizant said it had paid all applicable taxes due on the transaction.
The company's accounts were frozen a week back and it had approached the High Court against the tax department, according to the report.
"Cognizant's business operations, our associates and our work with clients are not impacted by actions recently attempted by the Indian Income Tax Department," the company said.
A Cognizant spokesman declined to give more details, while tax department officials could not be reached for comment outside regular business hours.
The U.S.-listed IT services has significant operations in India where the majority of its 260,000 employees reside.