How to get refund of Income Tax paid in excess ?

[KASTURI SETHI]

Dear  Experts,

The following query has been raised by my brother who is Retired Bank  Manager (Punjab & Sindh Bank);-

'I retired on 31.8. 2018 and return of my income including retirement benefits  was filled on June 19. The Leave encashment amount was 748000/- and exemption on it was for Rs Three lac. I paid tax on 448000/- as my employer deducted the tax @ 20 percent. Now I have come to know that Govt.  has issued an order in which gratuity amount has been enhanced and it is considered that leave encashment rebate is also on full amount, I mean to say full leave encashment is exempted, but to get refund on excess TDS is payable by the Income Tax department  by getting permission. I have also come to know that permission has not been granted by the jurisdictional  Commissioner but the employees who file their case with High Court get decision in their favour. In this situation what should I  do to get refund. Secondly some seniors say that the case can not be opened after five yrs. My refund works out to Rs. 88000/- approximately.'

Any advice please.

Thanks a lot

[Sadanand Bulbule]

Dear Sirji

My opinion is like this:

As per law in 2018, exemption = Rs. 3 lakh only, so technically no excess tax was deducted.

The enhanced exemption (Rs. 25 lakh) came later in 2023 and it is not retrospective. So it does not apply to his retirement. That’s why the department/Commissioner won’t allow refund.

Only legal option:

1. File 119(2)(b) application (low chance of success),

OR

2. Approach High Court, but litigation costs may exceed the refund benefit (Rs. 88,000).

In short:

Without a High Court order, he cannot get the refund now.

The advice that “case cannot be opened after 5 years” is broadly correct because normal routes are time-barred.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, Your reply is very useful. Cleared all doubts.

Highly thankful to you for devoting your precious time for me.

AI Summary

Retired banker paid TDS on 2018 leave encashment; 2023 exemption increase not retrospective, refund unlikely; s.119(2)(b) possible A retired bank employee paid TDS on leave encashment after retirement in 2018 based on a Rs. 3 lakh exemption then applicable; a later 2023 increase in exemption is not retrospective, so the tax department and Commissioner likely will not grant a refund. Practical remedies are limited to a writ in High Court or a rare discretionary relief application under the tax administration power (s.119(2)(b)), both uncertain and potentially costly; the informal five-year time bar may also hinder ordinary refund routes. The claimed overpaid tax is approximately Rs. 88,000, which may be outweighed by litigation costs.