The Commissioner of Income-Tax (Appeals) rejected Nokia's challenge for the tax demand notice for five fiscal years starting 2006-07.
The company said it is examining all options, including going to the Delhi High Court in appeal.
"Nokia is disappointed by the decision of the Commissioner of Income-tax (Appeals), and will now examine all options open to it. These include taking the case back to the Delhi High Court," it said in a statement
Nokia's India unit was served the tax demand in March.
Tax case with Nokia follows similar disputes with some of the best known foreign firms in India including Cadbury Plc, Royal Dutch Shell, Vodafone Plc and LG Electronics Inc.
The notice issued by Income Tax Department alleged tax evasion by Nokia on royalty payments made against supply of software by the company's parent firm. Royalty payments attract a 10 percent tax deduction under the Tax Deducted at Source (TDS) category.
"In addition to the legal action Nokia is taking in India, it is worth remembering that the Ministry of Finance in Finland has launched the Mutual Agreement Procedure with its counterpart in India under the bilateral Double Taxation Avoidance Agreement to reach a common understanding on the matter. Nokia will act quickly and decisively to protect its interests," the company statement added.
The company said it will defend itself "vigorously" in the case and against any other Indian tax allegations, using all channels available.
It added: "Nokia reiterates its position is that it is in full compliance with Indian laws as well as the bilaterally negotiated tax treaty between the Governments of India and Finland.
"Since establishing the Chennai factory in 2006, indeed since starting business operations in India in the mid-1990s, Nokia has been scrutinised by the authorities regularly, and its policies have been validated by the Indian and Finnish Tax authorities in the normal course of tax proceedings."