Budget 2022: New section 239A introduced to file tax refund application before the Assessing Officer

Last updated: 03 February 2022

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The Finance Act 2022 has introduced a new section, 239A, to the Income-tax Act. This amendment allows individuals who have deducted and paid tax on income to a non-resident, but believe no tax was deductible, to apply directly to the Assessing Officer for a refund. Previously, taxpayers had to go through a formal appeal process with the Commissioner (Appeals). This change, effective from 1st April 2022, simplifies the process for claiming such tax refunds.

Amendment in the provisions of section 248 of Income-tax Act and insertion of new section 239A

1. Section 248 of the Act provides that in a case where, under an agreement or other arrangement, a person who has deducted tax on any income paid to a non- resident, other than interest, under section 195 of the Act, he may appeal to the Commissioner (Appeals) for a declaration that no tax was deductible on such income, if he claims that such tax is to be borne by him since no tax was required to be deducted on such income. Such appeal can be filed after making payment of tax so deducted to the credit of the Government account. Further, section 249 of the Act lays down that an appeal under section 248 of the Act should be filed within 30 days of making payment of such tax to the Government account.

2. To obtain a refund of the tax deducted and paid by a person, where it was not deductible, as per the provisions of section 248 of the Act, a taxpayer has no recourse to approach the Assessing Officer with such request. He has to necessarily enter the appellate process by filing an appeal before the Commissioner (Appeals). At the same time, the agreement or arrangement, under which the tax has been deducted and paid, is not brought on the record of the Assessing Officer or examined by him.

New Tax Refund Application Process Introduced

3. In view of the above, it is proposed that a new section 239A may be inserted in the Act to provide that such a person, who has made the deduction of tax under such an agreement or arrangement and borne the tax liability, when no tax deduction was required, may file an application for refund of such tax deducted before the Assessing Officer.

4. Such person can, if he is not satisfied with the order of the Assessing Officer, go into appeal against such order before the Commissioner (Appeals), under section 246A of the Act. Accordingly, the provisions of section 248 of the Act will not apply in cases where the date of tax payment, to the credit of Central Government is on or after 01.04.2022.

5. These amendments will take effect from 1st April, 2022.

[Clauses 66, 68 and 69]

FAQ :

Section 239A is a new provision introduced by the Finance Act 2022 that allows individuals to apply directly to the Assessing Officer for a refund of tax that was deducted and paid but was not actually required.

This section is for individuals who have deducted tax on income paid to a non-resident under an agreement or arrangement, have paid this tax to the government, and believe that no tax deduction was necessary in the first place.

Before Section 239A, if tax was deducted and paid incorrectly, individuals had to file an appeal with the Commissioner (Appeals) to claim a refund, rather than applying directly to the Assessing Officer.

The amendments, including the introduction of Section 239A, take effect from 1st April 2022.

If an individual is not satisfied with the order from the Assessing Officer regarding their refund application, they can appeal against that order before the Commissioner (Appeals) under Section 246A of the Act.

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