Income tax law | Updated October 2026

Section 132B of the Income-tax Act, 1961: Application of Seized or Requisitioned Assets

Section 132B governs how the Income Tax Department may use money, valuables and other assets seized during a search or requisitioned from another authority, including adjustment against tax liabilities, release of surplus assets and payment of interest. From 1 April 2026, the corresponding provision for new searches and requisitions is section 250 of the Income-tax Act, 2025.

Which law applies? The Income-tax Act, 2025 came into force on 1 April 2026. Under its repeal and savings provisions, proceedings connected with a search initiated or requisition made before commencement continue under the Income-tax Act, 1961. Section 132B therefore remains important for earlier cases; section 250 applies under the new Act.

Meaning and scope of section 132B

Seized assets are money, bullion, jewellery or other valuable articles taken into custody under the search-and-seizure powers of section 132. Requisitioned assets are assets obtained from an officer or authority holding them under another law through section 132A. Section 132B regulates their subsequent application; it does not itself confer the original power to search or requisition.

Section 132B(1): Recovery of tax liabilities from assets

Under clause (i), seized or requisitioned assets may be applied to qualifying existing liabilities and liabilities determined through assessment, reassessment, recomputation or block assessment, including applicable interest and penalties, where the person is in default or deemed in default. The provision refers to liabilities under the Income-tax Act, 1961, Wealth-tax Act, 1957, Expenditure-tax Act, 1987, Gift-tax Act, 1958, Interest-tax Act, 1974 and, following the 2024 amendment, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. It also addresses liabilities arising from settlement applications under section 245C(1).

Explanation 2 expressly excludes advance tax payable under Part C of Chapter XVII from the meaning of existing liability. This exclusion matters when requesting that seized money be adjusted against advance tax.

Release on application: first and second provisos

The concerned person may apply to the Assessing Officer within 30 days from the end of the month of seizure for release of assets.
The nature and source of acquisition must be explained to the Assessing Officer's satisfaction.
Qualifying existing liabilities may first be recovered, and the balance may be released with prior approval of the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner.
Where the provisos apply, the assets or relevant portion must be released within 120 days from execution of the last search or requisition authorisation.

Section 132B(1)(ii): Adjustment of seized money

Where assets consist entirely or partly of money, the Assessing Officer may apply that money towards liabilities covered by clause (i). The assessee is discharged from those liabilities to the extent of the money actually applied.

Section 132B(1)(iii): Recovery through sale of other assets

Where money is insufficient, other seized or requisitioned assets may be applied to outstanding qualifying liabilities. Such assets are deemed under distraint for this purpose; the Assessing Officer or Tax Recovery Officer may sell them following the prescribed recovery procedure, including the Third Schedule and the authorisation requirements associated with section 226(5).

Section 132B(2): Other methods of recovery

Use of seized or requisitioned assets does not prevent the Department from recovering outstanding liabilities through other recovery methods permitted under the Income-tax Act.

Section 132B(3): Return of surplus assets

After the relevant liabilities are discharged, any remaining assets or sale proceeds must be returned or paid forthwith to the person from whose custody the assets were seized. The Department cannot retain the surplus merely because assets were originally seized.

Section 132B(4): Interest on excess money retained

The Central Government must pay simple interest at 0.5% per month or part of a month on the qualifying excess of seized or requisitioned money and relevant sale proceeds over the amount needed to meet specified liabilities, after accounting for money released under the first proviso.

Interest runs from the day immediately after the expiry of 120 days from execution of the last authorisation until completion of the applicable assessment, reassessment or recomputation. It is calculated on the statutory excess, not automatically on the entire value of every asset seized.

Explanations to section 132B

Explanation 1: The expression block period takes its meaning from section 158B(a); execution of an authorisation for search or requisition is understood as provided in Explanation 2 to section 158BE. Explanation 2: Existing liability does not include advance tax payable under Part C of Chapter XVII.

Current law: Section 250 of the Income-tax Act, 2025

Section 250 replaces the corresponding framework for cases governed by the 2025 Act. It operates with section 247 (search and seizure) and section 248 (requisition), and separately sets out the principal rules:

Section 250(1): Recovery of specified existing liabilities, assessed liabilities (including block assessments, interest and penalties) and qualifying legacy settlement liabilities. Existing liabilities under the 2025 Act, 1961 Act and Black Money Act are covered, but advance tax is excluded.
Section 250(2): Release application within 30 days after the end of the seizure month, subject to explanation of source, recovery of existing liabilities and prior approval.
Section 250(3): Release of qualifying assets within 120 days of the last executed authorisation.
Sections 250(4) and (5): Adjustment of money and recovery from other assets, with the prescribed process and section 416(7) authorisation.
Sections 250(6) and (7): Other recovery powers remain available, and surplus assets or proceeds must be returned promptly.
Sections 250(8) and (9): Simple interest at 0.5% per month or part on the prescribed excess, for the specified period after 120 days until completion of assessment, reassessment or recomputation.

For the precise statutory interest computation, section 250(8) uses the formula (A - B) + (C - D), where A is seized or requisitioned money, B is money released, C is relevant sale proceeds and D is the aggregate required to meet qualifying liabilities. The provision should be read as a whole when determining entitlement and the applicable amount.

Practical steps to request release

Identify the date of seizure, the date of execution of the last authorisation and the governing Act.
Prepare ownership and source-of-funds evidence, such as bank records, books of account, invoices and tax returns.
Submit the release application to the Assessing Officer within the statutory deadline, identifying the assets and requesting adjustment only against qualifying liabilities.
Seek details of adjustments, approvals and outstanding balances; request release of surplus assets and statutory interest where applicable.

Official legislation and related provisions

This article explains the statutory provisions generally. The applicable rules, procedural dates and savings provisions depend on the facts and date of the search or requisition.