Section 250 Income Tax Act 2025: How Are Seized Assets Released?

Section 250 regulates the application, release and return of assets seized during an income-tax search or requisitioned from another authority. It balances recovery of legally payable tax liabilities with the return of assets that are not required for recovery.

Current law: The Income-tax Act, 2025 came into force on 1 April 2026. This explanation refers to Section 250 in the Act as amended by the Finance Act, 2026. The exact facts, assessments and applicable rules determine the outcome of an individual case.

What does Section 250 cover?

Where money or other assets have been seized under Section 247 or requisitioned under Section 248, Section 250 specifies how identified tax liabilities may be discharged, how a person may seek release of assets, and what happens to the remaining property or sale proceeds.

Section 250: Subsection-wise legal explanation

Section 250(1): Liabilities recoverable from seized assets

Assets may be applied towards specified existing tax liabilities for which the person is in default or deemed to be in default, including liabilities under the Income-tax Act, 2025, the Income-tax Act, 1961 and the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Advance tax under Part C of Chapter XIX is expressly excluded from the category of existing liabilities described in clause (a). The provision also covers qualifying liabilities determined on completion of assessment, reassessment or recomputation, including applicable interest and penalties, as well as liabilities connected with specified settlement applications under the 1961 Act.

Section 250(2): Application for release of seized assets

The person concerned may apply to the Assessing Officer within 30 days from the end of the month in which the asset was seized. Release of all or part of the seized assets is subject to the Assessing Officer being satisfied with the explanation of their nature and source of acquisition, recovery of applicable existing liabilities, and prior approval from the specified senior income-tax authority. The statutory wording specifically addresses seized assets; it should not be assumed that every requisitioned asset follows precisely the same application mechanism.

Section 250(3): Time limit for release

Assets qualifying for release under subsection (2) must be released within 120 days from the date on which the last search or requisition authorisation was executed. This is not an unconditional 120-day deadline for the release of every seized asset: the subsection (2) requirements must be fulfilled.

Section 250(4): Adjustment of seized money

Where seized or requisitioned assets include money, the Assessing Officer may apply that money against the liabilities specified in subsection (1). The taxpayer's liability is discharged to the extent of the amount actually applied.

Section 250(5): Recovery from assets other than money

Non-cash assets may also be used to discharge remaining liabilities. The provision treats such assets as under distraint for the specified recovery purpose, with reference to Section 416(7), and recovery must follow the prescribed procedure.

Section 250(6): Other recovery methods remain available

Recovery under Section 250 does not prevent the Income Tax Department from using other recovery mechanisms permitted by the Act.

Section 250(7): Return of surplus assets

After discharge of the liabilities specified in subsection (1), any remaining assets or proceeds must be made over or paid forthwith to the person from whose custody the assets were seized.

Section 250(8): Interest on the statutory balance

The Central Government must pay simple interest at 0.5% for every month or part of a month for the period defined in subsection (9), on the amount determined by the statutory formula:

Interest base = (A - B) + (C - D)
A: money seized or requisitioned;
B: money released under subsection (2);
C: proceeds from assets sold towards liabilities;
D: aggregate amount needed to meet subsection (1) liabilities.

The interest base is determined by the statutory formula, not automatically by the gross value of everything seized.

Section 250(9): Period for calculating interest

The interest period begins on the day immediately following the expiry of 120 days from execution of the last search or requisition authorisation and ends on completion of the assessment, reassessment or recomputation, as applicable. The statutory wording should be applied to the relevant proceedings and dates.

Relevant statutory terms and concepts

Seized assets: Money, valuables or other assets taken into custody pursuant to search and seizure powers under Section 247.

Requisitioned assets: Assets obtained from another officer or authority through the statutory requisition mechanism under Section 248.

Assessing Officer: The income-tax authority exercising the assessment-related functions assigned under the Act and applicable jurisdictional provisions.

Person in default or deemed in default: A person against whom a qualifying tax liability is enforceable under the applicable statutory provisions.

Distraint: A legal recovery mechanism involving control over assets for satisfaction of a debt or tax liability, subject to the prescribed process.

Practical illustration

Suppose Rs. 10 lakh in cash is seized during an authorised search and Rs. 3 lakh is an existing recoverable tax liability. If the relevant statutory conditions are met, the department may adjust Rs. 3 lakh against that liability. Whether the remaining Rs. 7 lakh is released, and whether interest is payable, depends on the release conditions, other liabilities, statutory dates and the formula in subsections (8) and (9). This example is illustrative, not a determination of entitlement.

Practical steps for an affected person

Preserve the search documentation, seizure inventory and dates of execution of authorisations.
Collect evidence showing the nature and lawful source of acquisition of the assets.
Where subsection (2) applies, submit a supported release application within the statutory period.
Verify the amount and legal basis of each liability proposed to be adjusted.
Seek an account of surplus assets, sale proceeds and any interest due under the statutory formula.

Frequently asked questions

Can the Income Tax Department use seized cash to recover tax?

Yes. Section 250 permits adjustment of seized or requisitioned money towards specified recoverable liabilities, subject to its conditions.

How soon must an application for release be filed?

Under subsection (2), the application must be made within 30 days from the end of the month in which the asset was seized.

Must all seized property be returned within 120 days?

No. The 120-day requirement in subsection (3) applies to assets that qualify for release under subsection (2).

What happens to assets left after tax recovery?

Section 250(7) requires remaining assets or proceeds to be returned or paid forthwith to the person from whose custody the assets were seized.

What interest rate is provided under Section 250?

Simple interest of 0.5% per month or part of a month applies to the amount and period determined under subsections (8) and (9).

Official sources and related provisions

For the controlling statutory wording, consult the Income-tax Act, 2025 as amended by Finance Act, 2026 and the Income Tax Department's official Act and Rules resources. Also see Section 247, Section 248 and Section 416(7) for the connected recovery framework.

Last reviewed: 11 November 2026. This article provides general legal information and is not a substitute for advice on specific facts.