Income-tax refund set off and withholding framework allows adjustment against dues and temporary retention during pending assessment proceedings.

Set off of income-tax refunds against outstanding sums payable under the Income-tax Act, 1961 or the Income-tax Act, 2025 is permitted where a refund becomes due or is found due to a person. The Assessing Officer or the specified higher tax authorities may apply the refund, or any part of it, toward the amount remaining payable by that person in lieu of payment of the refund. Any proposed set off must be preceded by written intimation to the person concerned. Where only part of the refund is set off, or no amount is set off, and refund nevertheless becomes due, the Assessing Officer may withhold the refund for up to sixty days from the date of assessment or reassessment if proceedings are pending.

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