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In the year 2011-12 a total of Rs. 88,000 was deducted as Income Tax from my annual income under Tax Deducted at source (TDS) category of the Income Tax Act 1961 (for details visit https://www.tin-nsdl.com/etds-etcs/eTDS-overview.php). Now my Chattered Accountant (CA) has filed a return of Rs. 84 thousand only. The Income Tax Department will refund Rs. 84,000 after 7 months with some interest on 84,000, while my actual deduction was 88,000. I will also pay Rs. 1000 to the CA as fee for filing my return. The amount deducted has been deposited in the same Govt. treasury which will refund the amount with interest in 7-8 months. In view of the above, my questions are; Can the whole amount refunded by IT Department after 7 months with interest be mine? Would I need to take out interest and give it to someone without intention of any reward? What about the difference amount between the actual tax deducted and refunded which are 88,000 and 84,000 respectively?

Answered according to Hanafi Fiqh by Darulifta-Deoband.com

In the year 2011-12 a total of Rs. 88,000 was deducted as Income Tax from my annual income under Tax Deducted at source (TDS) category of the Income Tax Act 1961 (for details visit https://www.tin-nsdl.com/etds-etcs/eTDS-overview.php). Now my Chattered Accountant (CA) has filed a return of Rs. 84 thousand only. The Income Tax Department will refund Rs. 84,000 after 7 months with some interest on 84,000, while my actual deduction was 88,000. I will also pay Rs. 1000 to the CA as fee for filing my return.
The amount deducted has been deposited in the same Govt. treasury which will refund the amount with interest in 7-8 months. In view of the above, my questions are;
Can the whole amount refunded by IT Department after 7 months with interest be mine? Would I need to take out interest and give it to someone without intention of any reward?
What about the difference amount between the actual tax deducted and refunded which are 88,000 and 84,000 respectively?

Answer

(Fatwa: 153/124/N=1434)

According to Shariah income tax is unlawful and draconian. Hence in the question mentioned above whatever interest you receive from income tax department as interest it shall be lawful for you. It shall also be declared the part of deducted amount like 84000 in income tax though the department terms it as interest. However, if this amount is more than 4 thousand i.e. all the amount which you received back is more than 88 thousand along with interest, then the extra amount shall be interest as per the Shariah. It shall not be lawful to use it as fee of filling return or in any other way rather it shall be necessary to give it in charity to the poor and needy ones without the intention of reward.

Allah (Subhana Wa Ta’ala) knows Best

Darul Ifta,
Darul Uloom Deoband

This answer was collected from the official ifta website of Darul Uloom Deoband in India.

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