Income tax refund to firm

gaddala ramesh (55 Points)

23 March 2023

income tax refund to firm it is capital or indirect income

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Mitali (Asst Accountant) (2231 Points)
Replied 23 March 2023

An income tax refund to a firm is considered as an indirect income, and not a capital receipt.

Indirect income is the income that is earned by a firm, but not directly related to its main business activities. It includes items such as rent received, interest earned on deposits, commission received, and other similar sources of income.

In the case of an income tax refund, it is not related to the firm's main business activities, and hence it is considered as an indirect income. It is a refund of excess tax paid by the firm in the past and is treated as income in the year of receipt.