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CS Executive · Tax Laws and Practice · Procedural Compliance under Income Tax

A refund of ₹90,000 is due to Kavita Exports. Tax of ₹35,000 remains payable by it under the Income-tax Act, 1961 for an earlier year and ₹20,000 remains payable under the Income-tax Act, 2025. Written intimation has been given. If the authority sets off to the maximum permitted extent under section 438(1), what is the balance refund, and what is the basis?

The balance refund is ₹35,000. Section 438(1) allows set off against sums payable under both the 1961 Act and the 2025 Act. Total dues are ₹55,000, so ₹90,000 less ₹55,000 leaves ₹35,000, after written intimation.

  1. A₹55,000, as only the 1961 Act dues can be set off
  2. B₹70,000, as only the 2025 Act dues can be set off
  3. C₹35,000, as dues under both Acts can be set offCorrect
  4. D₹90,000, as set off is not allowed against earlier law dues

Explanation

Section 438(1), as amended with effect from 1-4-2026, permits set off against sums remaining payable under the 1961 Act or the 2025 Act. Total dues are 35,000 + 20,000 = 55,000. Balance refund is 90,000 - 55,000 = 35,000. Limiting set off to one Act gives 55,000 or 70,000, which is wrong.

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