Accounting for Income tax refund

BANK AC------DR.

        TO CAPITAL ACCOUNT(WITH PRINCIPAL AMT.)

         TO INTT. ON REFUND AC.(WITH INTEREST AMT.)

Thanks for reply, but in case for company; how can we credit capital if provision for tax is already made.

Hi Manish,

Amount of Refund will be set off against the provision for tax created for the respective AY regarding which you have received the amount. Treat the difference as income / loss in P&L.

Manish

Income Tax Refund is to be set off against Tax provision and Advance Tax paid and if any excess\ shortage is to be recgonised in P&L a/c

Originally posted by : CA Raghavendra S S
	Manish Income Tax Refund is to be set off against Tax provision and Advance Tax paid and if any excess\ shortage is to be recgonised in P&L a/c

AGREED

If income tax refund is received for any  year then the books of accounts for that particular year would have been closed by creating a  Income tax refund provision a/c after adjusting the advance tax paid and tds amount deducted for that company. Such a/c would show a debit balance.The name of the account could be Income tax refund a/c or balance with revenue authorities or it may have some other name. At the time of receiving the refund this a/c is credited and closed and the bank a/c is debited. The difference which is excess or short is taken to the revenue.

PROVISION FOR INCOME TAX- DR

BANK A/C - DR

TO ADVANCE TAX -  (IF ANY)

TO TDS- (IF ANY)

TO INTEREST ON INCOME TAX REFUND

Amount of income tax refund will be credited to P&L account being an item of income in the year in which it is received. the same will be disallowed while calculating Income from Business under Income Tax Act.

Originally posted by : CA Raghavendra S S
	Manish Income Tax Refund is to be set off against Tax provision and Advance Tax paid and if any excess\ shortage is to be recgonised in P&L a/c

agreed

Originally posted by : CA Azim Khan ACA., CS.
	Amount of income tax refund will be credited to P&L account being an item of income in the year in which it is received. the same will be disallowed while calculating Income from Business under Income Tax Act.

 Dear Colleague,

How the income can be disallowed?

Further, all the accounts standing for the particular year viz adv tax, provision, TDS, Self Asst Tax should be closed and difference if any should be passed through P/L A/c...

Mr ParthSarthi Patel is correct.

what will be treatment in tax if refund is receivable as per last year balancesheet now cease

to be refunded ? eg custom refund accounted as income in previous year but in current year no refund to be received

Debit Income tax refund account

 and credit profit or Loss account