How to Adjust Previous Year Income Tax Refund Last year you had a refund available but this year IRIS is not allowing you to make adjustments. When you try to adjust the refund there, the system either zeroes it or adjusts it to a lower value. The question is why is IRIS doing this? Is there any online solution for this through which we can take the adjustment or do we have to take approval from the FBR office? In today’s small topic, we discuss this issue in details.
What is a refund and How to Adjust in IRIS?
What is a refund? if a tax paid exceed the payable amount. For example, if in the fiscal year 2024 the tax payable was 100,000, but the deducted amount is 150,000, then it means that the revenue department has collected an additional Rs 50,000. This amount is called a refund. Now in the next fiscal year, i.e. 2025, the amount of 50,000 should be the opening balance.
Suppose your tax liability this period is Rs 200,000 and you have paid Rs 250,000. In principle, the system should adjust this and Rs. 50,000 should be available as a Rebate. But IRIS, when you write the refundable amount as adjustment there, makes it zero.
Why FBR has blocked tax refund adjustment?
Earlier, there was a facility that we could adjust the tax Credit for the next year by making manual entry. But from fiscal year 2021 onwards, the system blocked this option. Now IRIS itself assesses whether the Rebate is really there or not. The reason for this is that some people used to make fake claims. They used to show the credit of the previous period in their tax return and reduce the amount payable to the revenue authority. That is why IRIS blocked this.
Data not matched?
Another reason behind this block is that the data does not match in different FBR portals. For example, if your paid advance taxes on the FBR’s MIS portal is Rs 100,000 but the same data is coming as Rs 90,000 on IRIS, then when you claim a refund of Rs 100,000 or more, the system blocks it. Because according to it, there is not that much value in the MIS. That is why in most cases the system does not allow adjustment.
What to do to take previous period tax refund?
But Just this blocking does not mean that refund is not available. FBR state that refundable amount is still available and a taxpayer can claim it but there is a proper procedure for this. The taxpayers have to visit the FBR office, provide documentation and file a refund application (both online and manual methods are available). After this, the FBR will audit your case and if it accepts that you are indeed entitled for compensation, it will issue a tax adjustment document. When this document is issued, it is automatically updated in IRIS and also appears in payment tab of the taxpayer.
Can a small amount be adjusted?
There is another point to understand here. IRIS allows adjustment of refunds of small amounts (e.g. less than Rs 10,000). If the previous year’s balance is of low value, it is often auto-adjusted. But as soon as the amount becomes large, the system blocks it.
This problem is especially a big problem for small taxpayers. An ordinary salaried person who has a small amount of previous year tax credit like 20,000 or Rs 50,000 finds it difficult to visit the FBR office and submit the documentation. The result is that most people leave small amount claims. This is not fair to the taxpayer because the refund is their right.
How to Adjust Previous Year Income Tax Refund The Solution
Now what is the best solution? The most practical solution is to make your adjustments during the year itself. For example, if you have paid advance tax on a mobile company, vehicle, property or any other item, then immediately get the certificate of it and make the adjustments. If you do all this at the end of the period, it takes time and tax credits may not be available. This is why ordinary salaried persons should pay special attention so that their refundable amount available for adjustment.
Final Remarks
In short, IRIS has blocked the previous year tax adjustment to prevent fraudulent claims. But as a result, it created difficulties for ordinary taxpayers. There are only two solutions at this time: either get an adjustment during the year or go to the FBR office and get a refund adjustment document.
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