Circular: No. 285 [F. No. 275/77/79-IT(B)], dated 21-10-1980.

Procedure for regulating refund of amounts paid in excess of tax deducted and/or deductible

1. The Board have been considering the manner of refunding the amount paid in excess of the tax deducted and/or deductible (whichever is more) under sections 192 to 194D of the Income-tax Act. The Board are advised that such excess payment can be re­funded, independently of the Income-tax Act, to the person re­sponsible for making such payment subject to necessary adminis­trative safeguards.

2. In supersession of the earlier instruction on the subject, the following procedure is laid down to regulate the refund of such excess payments.

3. The excess payment would be the difference between the actual payment made by the deductor and the tax deducted at source or that deductible, whichever is more. This amount should be adjust­ed against the existing tax liability under any of the Direct Tax Acts. After meeting such liability the balance amount, if any, should be refunded to the assessee.

4. Where the tax is deducted at source and paid by the branch office of the assessee and the quarterly statement/annual return (in case of salaries) of tax deduction at source is filed by the branch, such branch office would be treated as a separate unit independent of the head office. After meeting any existing tax liability of such a branch, which would normally be in relation to the deduction of tax at source, the balance amount may be refunded to the said branch office. The Income-tax Officer, who will refund the amount, would be the one who receives the quarterly statement/annual return (in case of salaries) of tax deduction at source from that branch office and keeps record of the payments of tax deduction at source made by that branch.

5. The adjustment of refund against the existing tax liability should be made in accordance with the present procedure on the subject. A separate refund voucher to the extent of such liability under each of the direct taxes should be prepared by the Income-tax Officer in favour of the “income-tax department” and sent to the bank along with the challan of the appropriate type. The amount adjusted and the balance, if any, refunded would be debitable under the sub-head “Other refunds” below the minor head “Income-tax on companies”—major head “020—Corporation Tax” or below the minor head “Income-tax other than Union Emoluments”—major head “021—Taxes on incomes other than corporation tax” according as the payment has originally credited to the major head “020—Corporation tax” or the major head “021—Taxes on incomes other than corporation tax”.

6. Since the adjustment/refund of the amount paid in excess would arise in relation to the deduction of tax at source, the record­ing of the particulars of adjustment/refund should be done in the quarterly statement of TDS/Annual return (in case of salaries) under the signatures of the Income-tax Officer at the end of the statement, i.e., below the signatures of the person furnishing the statement.

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  1. Anil says:

    A new circular 2/2011 dtd 27/4/2011 has been issued by the board in suiperssession of this circular. However, the procedure is valid for refund claims upto 31.03.2010 only. Refund in other cases will be made as per procedure laid down u/s 200A.

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