Accounting for Income tax refund

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.

The entry for the refund of IT paid shall be-

Bank A/c- Dr                            xxxx

To Interest on IT refund A/c             xxxx

To TDS and Advance Tax A/c          xxxx

(Being refund received)

IT Refund is not an Income but Interest on IT refund is Income.

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