Treatment of it refund

Hi Vinny,

Advance Tax should be credited. Also if you have received interest on refund that should be booked as other income.

Cheers,

Sanjay

Isnt the Amount of Refund received for the Individual needs to be capitalised ??

Confusion.

Bank A/c Dr.

      To Int. on IT Refund A/c

      To Income tax refund A/c (created under the head Captial A/c in Tally)....

Hy, thanks for the query, first of all Income tax is personal expense and is part of corpus or capital it is paid from capital and also in case of any refund it is added back to capital of the person. Thus Advance tax A/c is itself a subhead of capital account think like this, if you have reduced asset viz. Bank a/c, you also have to reduce some liability for which you agree to part with your asset so as to keep balance sheet balanced but there is no liability listed on the liability side of balance sheet since tax on income is a charge on personal effects(assets) thus we can say that to retain our whole bunch of assets we have to part with a small part of it otherwise we might loose all of our assets because if we dont pay tax or hafta govt. Or gangs (both are same but purpose of existance is all along different) will auction our assets to recover money having said that capital is assesses own fund which is free from any outside liability else taxes.....thus your both options are correct. Interest income is taxable though and is to be accounted for as other income just like bank interest.