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Direct Tax Laws and International Taxation · Survey, Search and Seizure

Retention, Release and Presumptions for Seized Assets

Updated 11 October 2026 · Fact-checked

After a search, the department holds seized books and assets under sections 250 and 251 of the Income-tax Act, 2025. It can apply them to tax dues, retain them for a limited time, and release them if you explain their source. Solve questions by applying the stated time limits and conditions in order.

Understand Seized Assets: Retention, Release and Presumptions

A search under section 247 ends with seized cash, jewellery, books and documents. The law then answers three questions: what can the department do with the assets, how long can it keep them, and what can you do to get them back.

Application towards dues (section 250). Seized or requisitioned assets can be used to recover specified liabilities. These are: existing dues in default or deemed default (other than advance tax) under this Act, the Income-tax Act, 1961 or the Black Money Act, 2015; the liability from the assessment of the year relevant to the tax year of the search, or the block-period assessment, including penalty and interest; and liability arising on an application to the Interim Boards for Settlement. Money is applied directly, and you are discharged to that extent. Other assets are treated as under distraint and recovered in the prescribed manner. Anything left over must be returned forthwith.

Release (section 250(2) and (3)). You can apply to the Assessing Officer within 30 days from the end of the month of seizure. The officer must be satisfied that the nature and source of acquisition is explained, must first recover any existing liability out of the assets, and must get prior approval of the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner. Assets to be released must go back within 120 days from the date the last authorisation was executed.

Retention and copies (section 251). If the authorised officer has no jurisdiction over you, the seized material goes to the jurisdictional Assessing Officer within 180 days from the start of the search. You can take copies or extracts in the presence of the officer. Retention is allowed up to one month from the end of the quarter in which the assessment order is made. Longer retention needs written reasons and approval, and the approving authority cannot allow retention beyond 30 days from completion of all proceedings. You can object to the Board.

Presumption. In the search provisions, books, money, bullion, jewellery or other valuables found in your possession or control are presumed to belong to you, and the contents of seized books and documents are presumed true. The presumption is rebuttable. You rebut it with evidence of source or ownership. The supplied text does not give the section number for this rule, so know the rule rather than a number.

Interest on excess (section 250(8) and (9)). If seized money or sale proceeds exceed the liabilities, the Central Government pays simple interest. This is the only point in the topic that needs arithmetic.

Key rules to remember

Interest on excess seized money
Interest = 0.5% × number of months (part of a month counts as a month) × [(A – B) + (C – D)]
A = money seized or requisitioned; B = money released under section 250(2); C = proceeds of assets sold for liabilities; D = total liabilities under section 250(1). Simple interest.
Interest period
From the day after 120 days from the last authorisation executed, to the date of completion of assessment/reassessment/recomputation
Section 250(9). No interest runs inside the first 120 days.
Release application
Within 30 days from the end of the month in which the asset was seized
Needs source explained, existing liability recovered first, and prior approval of the Commissioner-level authority. Release within 120 days from the last authorisation.
Handover to jurisdictional AO
Within 180 days from the date of search or requisition
Applies where the authorised officer has no jurisdiction over the person searched (section 251(1)).
Retention limit
Up to one month from the end of the quarter of the assessment order; longer with written reasons and approval
Outer cap: approving authority cannot allow retention beyond 30 days from completion of all proceedings (section 251(3) and (4)).
Order of application
Money first, then other assets (deemed distraint), then surplus returned forthwith
Section 250(4), (5), (7). Recovery by this route does not bar other recovery modes (section 250(6)).

How to solve Seized Assets: Retention, Release and Presumptions questions

Most questions give a search scenario with dates and amounts and ask what the department may do or what the assessee can claim. Use this order.

  1. 1Identify the stage: seizure, release request, retention, application to dues, or interest on surplus.
  2. 2List the dates given: seizure date, last authorisation date, assessment order date, completion of all proceedings.
  3. 3Apply the matching time limit: 30 days from month-end for release application, 120 days for release, 180 days for handover, one month from quarter-end for retention.
  4. 4For release, check all three conditions: source explained, existing liability recovered first, prior approval obtained.
  5. 5For application to dues, check that the liability falls within section 250(1)(a), (b) or (c). Advance tax is excluded from clause (a).
  6. 6If interest is asked, compute (A – B) + (C – D), fix the period from day 121 onwards, count part months as full months, and apply 0.5% per month simple.
  7. 7State the conclusion clearly with the rule behind it, and mention rebuttal of the presumption where ownership is disputed.

Quickest way: Date-line method

When to use it: When a numerical or date-based question gives several dates and you have little time.

  1. Draw a line and mark seizure, last authorisation, assessment order and completion of proceedings.
  2. Add 120 days to the last authorisation. Interest and release deadlines hang on this point.
  3. Add 30 days to the end of the seizure month for the release application.
  4. Add one month to the end of the assessment-order quarter for retention. Add 30 days to the completion of proceedings for the absolute cap.
  5. For interest, compute (A – B) + (C – D) first, and only then multiply by 0.5% and the months.

Common mistakes in Seized Assets: Retention, Release and Presumptions

  • Counting the 30-day release application period from the date of seizure.

    The words 'within thirty days' make students start counting from the seizure itself.

    Fix: Count from the end of the month in which the asset was seized.

  • Starting the interest period from the date of seizure or search.

    Students assume interest runs from the time money is taken.

    Fix: Start from the day after 120 days from the last authorisation and run to completion of the assessment.

  • Treating a fraction of a month as zero in the interest calculation.

    Daily interest habits from other provisions.

    Fix: The rate is 0.5% for every month or part of a month, so any part month counts as a full month.

  • Saying the Assessing Officer can release assets on his own once the source is explained.

    Students remember only the explanation condition.

    Fix: Remember all three: source explained, existing liability recovered out of the assets, and prior approval of the Commissioner-level authority.

  • Treating the presumption about seized items as conclusive.

    Strong wording in the rule makes it look final.

    Fix: It is a presumption you can rebut with evidence of source or ownership, for example by showing the items belong to another person.

  • Applying seized assets to advance tax dues under section 250(1)(a).

    Students read 'any existing liability' too widely.

    Fix: Clause (a) excludes advance tax payable under Part C of Chapter XIX.

Worked examples

Example 1

Cash of ₹50,00,000 was seized from Mehta Traders on a search whose last authorisation was executed on 10 January 2027. ₹10,00,000 was released under section 250(2). Other seized assets were sold for ₹8,00,000. Total liabilities under section 250(1) were ₹30,00,000. The assessment was completed on 20 December 2027. Compute the interest payable by the Central Government.

Show the solution
  1. A = ₹50,00,000, B = ₹10,00,000, C = ₹8,00,000, D = ₹30,00,000.
  2. (A – B) = ₹40,00,000. (C – D) = ₹8,00,000 – ₹30,00,000 = –₹22,00,000.
  3. Amount = ₹40,00,000 – ₹22,00,000 = ₹18,00,000.
  4. 120 days from 10 January 2027: 21 days to 31 January, 28 in February (49), 31 in March (80), 30 in April (110), 10 in May (120). So 120 days expire on 10 May 2027.
  5. Interest period starts on 11 May 2027 and ends on 20 December 2027. 11 May to 10 December is 7 full months. 11 to 20 December is a part month, which counts as one month. Total 8 months.
  6. Interest = ₹18,00,000 × 0.5% × 8 = ₹9,000 × 8 = ₹72,000.

Answer: Simple interest of ₹72,000 is payable.

Example 2

Jewellery was seized from Kavita Rao on 12 March 2027. The assessment order for the relevant year was made on 15 August 2027, and all proceedings relating to the seized material were completed on 31 March 2029. (a) By what date must she apply for release? (b) Up to when can the officer retain the material without special approval? (c) What is the latest date to which retention can be approved? Take the quarter as July to September.

Show the solution
  1. (a) Seizure month is March 2027. The month ends on 31 March 2027. Thirty days from then gives 30 April 2027.
  2. She must also satisfy the conditions: source explained, existing liability recovered from the assets, and prior approval of the Commissioner-level authority.
  3. (b) The order was made in the quarter ending 30 September 2027. Retention is allowed up to one month from the end of that quarter, so up to 31 October 2027.
  4. (c) Beyond that, the officer needs written reasons and approval. The approving authority cannot allow retention beyond 30 days from completion of all proceedings. 30 days from 31 March 2029 is 30 April 2029.

Answer: (a) By 30 April 2027. (b) Up to 31 October 2027. (c) Not beyond 30 April 2029.

Exam tips

  • Write the time limits as a small list: 30 days (release application), 120 days (release and interest start), 180 days (handover), one month from quarter-end (retention), 30 days (outer cap).
  • In case questions, state the three release conditions explicitly, since marks are usually split across them.
  • In interest problems, show A, B, C and D separately, then the net amount, then the period. Method marks are given even if the arithmetic slips.
  • For ownership disputes, state that the presumption applies but can be rebutted, then say what evidence the assessee should bring.
  • Quote section 250 for application and release, and section 251 for retention and copies. Do not guess a section number for the presumption rule.

Practice questions from Survey, Search and Seizure

Seized Assets: Retention, Release and Presumptions in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Seized Assets: Retention, Release and Presumptions: frequently asked questions

How are seized assets released after a search?

You apply to the Assessing Officer within 30 days from the end of the month of seizure. The officer must be satisfied that the source is explained, recover any existing liability out of the assets, and get prior approval of the Commissioner-level authority. Release must be made within 120 days from the last authorisation.

How long can seized books and documents be retained?

Up to one month from the end of the quarter in which the assessment order is made. Longer retention needs written reasons and approval, and cannot go beyond 30 days from completion of all related proceedings.

Can I take copies of seized documents?

Yes. On your application, the authorised officer allows you to make copies or take extracts, in the presence of the officer or a person empowered by the officer, at a time and place the officer appoints.

What can I do if I object to the retention approval?

If you are legally entitled to the assets or material, you can apply to the Board giving reasons and asking for return. The Board hears you and passes such orders as it thinks fit.

Is interest paid on seized money held beyond 120 days?

Interest is paid only on any excess, computed by the formula (A – B) + (C – D), at 0.5% simple per month or part of a month. It runs from the day after 120 days from the last authorisation until the assessment is completed.