Accounting for Income tax refund

What will be the accounting entry for income tax refund in case of company?

Replies (16)
Quick Summary
Income tax refund in companies is adjusted against tax provisions, advance tax, and TDS. Refund reduces these balances, and any difference is recognized in P and L. Interest on refund is treated as income.

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

WHAT WILL BE ACCOUNTING ENTRY FOR INCOME TAX REFUND IN CASE OF COMPANY

Debit Income tax refund account

 and credit profit or Loss account

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
21 August 2026
Finance Manager

Resollect Technologies Pvt Ltd

Mumbai

CA

View Details
Company
13 August 2026
Chartered Accountant (FP&A)

Client of Trellis Consulting

Gurgaon

CA

View Details
Company
ARTICLESHIP 26 August 2026
CA Article Assistant/CA Drop Out/Accounts Executive

PARV & Co.

New Delhi

CA Inter

View Details
Company
ARTICLESHIP 04 September 2026
Accounts Executive

Hema Yashwanth & Associates

Chennai

B.Com

View Details
Company
12 August 2026
Deputy Manager - Finance

RoamPrime Technologies Private Limited

Bengaluru

CA

View Details
Company
ARTICLESHIP 17 August 2026
CA Article Trainee

ASC Group

Noida

CA Inter

View Details
Company
ARTICLESHIP 24 August 2026
Chartered Accountant Articles

Rohit KC Jain & Co

New Delhi

CA Inter

View Details
Company
11 August 2026
COMPLIANCE EXECUTIVE

YMW COMPLIANCE SERVICES LLP

Others

CA Final

View Details