Accounting for Income tax refund

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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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