Income tax refund received

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 September 2013 What shall be the accounting entry for refund received without any interest in case of a company. Would like to mention that, the refund is due to excess deposit of interest u/s 234B.

Ganeshbabu K

Ganeshbabu K (Expert)
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23 September 2013 1)P&L A/c
to provision for tax

(on provision)
2)provision for tax
to income tax payable/refundable

3)income tax payable / refundable Dr
to bank A/c
(on payment of income tax

4)bank account Dr
to income tax refundable/ payable
.
.
all legers should goes zero

Querist : Anonymous

Querist : Anonymous (Querist)

23 September 2013 The refund received is for FY 11-12. There has been no provision passed for refund.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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31 July 2024 When a company receives a refund for excess deposit of interest under section 234B without any interest, the accounting entry should reflect the receipt of the refund and the adjustment of the excess deposit. Since there was no provision passed for the refund, the refund amount should be credited to the appropriate account. Here's how you can record the transaction:

### Accounting Entry:

1. **Bank Account:**
- Debit the bank account to reflect the increase in cash due to the refund received.

2. **Income Tax Receivable Account:**
- Credit the income tax receivable account or the relevant tax account where the excess deposit was originally recorded.

### Journal Entry:

```plaintext
Date: [Date of Refund Receipt]

Bank Account Dr. [Amount of Refund]
To Income Tax Receivable Account [Amount of Refund]

(Being refund received for excess deposit of interest under section 234B for FY 11-12)
```

### Explanation:

- **Bank Account (Debit):** This increases the cash balance of the company as the refund amount is received.
- **Income Tax Receivable Account (Credit):** This decreases the receivable or tax deposit account, reflecting the adjustment of the excess amount that was initially deposited.

### Example:

Suppose the refund amount received is ₹50,000.

```plaintext
Date: [Date of Refund Receipt]

Bank Account Dr. ₹50,000
To Income Tax Receivable Account ₹50,000

(Being refund received for excess deposit of interest under section 234B for FY 11-12)
```

This entry ensures that your books accurately reflect the receipt of the refund and the adjustment of the excess deposit initially recorded. If there are any specific guidelines or practices followed by your company or industry, you should consider those while recording the transaction.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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