Treatment of excess tax paid

This query is : Resolved

rajesh (Querist)
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17 June 2010 One of my client has paid total advance tax of Rs. 125000/- for a particular year. However when the assessment is completed IT department has refunded rs. 25000/- of tax and 1245 interest. My question is how to show the entry of rs. 25000/- in the books of account. Whether to consider it as income in p& l account and if so whether it is treated as income for the purpose of calculating tax for current year.

Shyam Lal Naik

Shyam Lal Naik (Expert)
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17 June 2010 It will be credited to P/L appropriation A/c. Not a taxable income. However, interest is taxable as income from other sources

Shyam Lal Naik

Shyam Lal Naik (Expert)
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17 June 2010 It will be credited to P/L appropriation A/c. Not a taxable income. However, interest is taxable as income from other sources

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CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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17 June 2010 If in the books , Refund to be recd Rs.25000 is stand then you have to adjust Rs.25000 agaisnt it and Interest on income tax refund is to be shown in profit & loss a/c as indirect income.

Now
Bank A/c Dr. 26245
To Income Refund to be recd 25000/-
To Interest on IT refund 1245/-
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If you have already adjusted Rs.25000 in captil of prorpreitor a/c, then you have to given credit of Rs.25000 in capital a/c

i.e
Bank A/c Dr. 26245
To capital A/c 25000/-
to Interest on IT refund 1245/-

ajay taneja

ajay taneja (Expert)
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17 June 2010 Interest of Rs.1245/- is taxable. you can credit it in capital account by Rs.25000/-, if it is proprietorship concern. (If you have debited the capital account, when you had paid advance tax and if you had shown advance tax in current assets, then you have to transfer Rs.1 lac to capital account then your advance tax account will become nil as you had already credited it by Rs.25000/- when you had deposited the refund voucher in your bank account.