Section 241A of Income-tax Act, 1961: Withholding of Refund in Certain Cases
Section 241A historically permitted an Assessing Officer to withhold a refund arising under section 143(1) in specified scrutiny cases, subject to written reasons and prior approval. The provision ceased to apply from 1 April 2023.
What did Section 241A provide?
Section 241A applied to assessment years commencing on or after 1 April 2017. Where a refund became due under section 143(1), the Assessing Officer could withhold that refund if the statutory conditions were satisfied.
The provision required a notice under section 143(2), an opinion that granting the refund was likely to adversely affect the revenue, reasons recorded in writing, and previous approval of the Principal Commissioner or Commissioner. The refund could then be withheld up to the date on which the assessment was made.
Conditions for withholding under old Section 241A
| Requirement | Meaning |
|---|---|
| Refund due under section 143(1) | The return processing resulted in a refund becoming due to the assessee. |
| Notice under section 143(2) | The return had been selected for scrutiny and the statutory notice had been issued. |
| Likely adverse effect on revenue | The Assessing Officer had to form the opinion that granting the refund was likely to adversely affect the revenue. |
| Reasons in writing | The reasons for withholding the refund had to be recorded in writing. |
| Previous approval | Prior approval of the Principal Commissioner or Commissioner was required. |
| Maximum period | The refund could be withheld up to the date on which the assessment was made. |
Section 241A ceased to apply from 1 April 2023
The Finance Act, 2023 inserted a proviso expressly stating that section 241A does not apply from 1 April 2023. Accordingly, the section should not be presented as the current statutory authority for withholding refunds after that date.
Withholding under Section 245 after 1 April 2023
The Finance Act, 2023 restructured section 245 of the Income-tax Act, 1961 so that the provision addressed both set-off of refunds against outstanding tax and withholding of refunds where assessment or reassessment proceedings were pending.
Under the later section 245 framework, the Assessing Officer could, having regard to pending assessment or reassessment proceedings, withhold a refund for reasons recorded in writing and with previous approval of the Principal Commissioner or Commissioner. The statutory period was subsequently extended so that the refund could be withheld up to sixty days from the date on which the assessment or reassessment was made.
Current law: Section 438 of Income-tax Act, 2025
Section 438 of the Income-tax Act, 2025 is titled Set off and withholding of refunds in certain cases. It combines the power to set off a refund against an amount remaining payable with a power to withhold a refund in specified cases.
Set-off against outstanding amount
Where a refund becomes due or is found due, the specified income-tax authority may, instead of paying the refund, set off the whole or part of it against an amount remaining payable by that person under the Act. The person must first be given written intimation of the proposed action.
Withholding where assessment or reassessment is pending
Where a refund becomes due and assessment or reassessment proceedings are pending, the Assessing Officer may, for reasons recorded in writing and with previous approval of the Principal Commissioner or Commissioner, withhold the refund up to sixty days from the date on which the assessment or reassessment is made.
Official resources
- Income Tax Department - Section 241A
- Income-tax Act, 1961 - official reference text
- Income Tax Department - Section 438 of Income-tax Act, 2025
- Income Tax e-Filing Portal
Updated: 29 September 2026. The applicable provision depends on the relevant assessment or tax year and the repeal and savings provisions governing the proceeding.