Background - There is excess provision for income tax in books of accounts.
Assesment is completed.
We have received Refund.
Refund is income for us.
Question - In Profit and Loss a/c where we must group the income under Other Income or we have to net of in tax line ?
REFUND OF INCOME TAX MIGHT HAVE TWO COMPONENTS - TAX & INTEREST
INTEREST
Interest on Income tax refund is ur income and should be booked under "other/misc. incomes"
TAX
1) Refund of Tax should be credited to Advance tax/TDS A/c
2) If Advance Tax/TDS has already been adjusted with the provisions then - Refund should be taken after the net profit (after tax) i:e in Appropriation A/c or What called as"Below the Line"
Income tax refund should be shown as a other income in P& L A/c......
IT Refund to be credied to P/L as other Income
Can you please give reasons for your answer. (Is there any literature available)
CAclubindia
