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Account for IT Refund

ARITRA CHAKRABORTY (Article Trainee) (221 Points)

01 November 2020

How to account for IT refund?

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Rama chary Rachakonda (Master in Accounts & high court Advocate) (8437 Points)
Replied 01 November 2020

Make an accounting entry for tax refund money

You will debit an asset account and credit the originally debited account for the taxes paid. To show that you received a tax refund, use the following entries: Debit the cash account. Credit the income tax expense account.

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prasad Nilugal ( GST Practitioner & Accounts ) (14916 Points)
Replied 01 November 2020

process of refund this F.Y and next F.Y

1) Advance Income Tax A/c Dr

To Bank A/c Cr

( Advance Tax paid )

2) Expense A/c Dr

TDS A/c Dr

To Bank A/c Cr

( Expense paid also TDS Deducted )

On 31st March provision Entry

Income Tax A/c Dr

Income Tax payable A/c Cr

( provision entry on 31st march )

on 1/4/2020 Advance Tax A/c , TDS A/c debit balance and Income Tax payable credit balance will be Carried forward in the next F.Y because assessment will be done next year .

After assessment in the next year , Adjustment entry will be

Income Tax payable A/c Dr

To Advance Tax A/c Cr

To TDS A/c Cr

( Income Tax payable will be adjusted against paid )

Excess Tax paid refundable entry will be

Income tax payable A/c Dr

To Income Tax refund A/c Cr

( excess tax paid refundable )

When we received refund as per your query refund entry will be

Bank A/c Dr

To Income Tax payable A/c Cr