Section 132B of the Income-tax Act: Application and Release of Seized or Requisitioned Assets

Section 132B of the Income-tax Act, 1961 governs how the Income Tax Department can apply assets seized during a search or obtained by requisition against legally recoverable tax liabilities, and when any balance must be returned. For matters governed by the Income-tax Act, 2025, the corresponding provision is Section 250.

What does Section 132B mean?

Seized assets are money or other assets taken into custody during an authorised income-tax search under Section 132. Requisitioned assets are assets obtained from another officer or authority under Section 132A. Section 132B provides the statutory mechanism for adjusting such assets against eligible demands, recovering unpaid liabilities, returning surplus assets and paying interest in specified circumstances.

Section 132B(1): Adjustment against tax liabilities

Under clause (i), seized or requisitioned assets may be applied to existing liabilities under the specified direct-tax enactments and to liabilities determined on assessment, reassessment or recomputation, including applicable interest and penalties, where the person is in default or deemed to be in default. The provision also addresses specified settlement-related liabilities.

The updated text of the 1961 Act includes references to the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, and to assessment or reassessment or recomputation. The historical text on this page has therefore been brought up to date rather than reproducing obsolete assessment wording.

Release of explained assets: first and second provisos

1. The concerned person may apply to the Assessing Officer within 30 days from the end of the month of seizure.
2. The nature and source of acquisition of the asset must be satisfactorily explained.
3. Existing liabilities may first be recovered from the asset.
4. Release of the balance requires prior approval of the prescribed senior income-tax authority.
5. The statutory release period is 120 days from execution of the last search or requisition authorisation, subject to the applicable provision and facts.

Section 132B(1)(ii): Money seized

Money forming part of the seized or requisitioned assets may be used to discharge eligible liabilities. The taxpayer receives credit for the amount actually applied.

Section 132B(1)(iii): Assets other than money

Where money is insufficient, other assets may be used to recover remaining eligible liabilities. The 1961 Act treats such assets as under distraint and provides for recovery by sale under the prescribed statutory process, including the Third Schedule.

Section 132B(2) and (3): Other recovery methods and return of surplus

Sub-section (2) preserves other lawful tax-recovery methods. Under sub-section (3), any remaining assets or sale proceeds must be handed over or paid to the person from whose custody they were seized once the relevant liabilities have been discharged.

Section 132B(4): Interest on excess money retained

The Central Government must pay simple interest at 0.5% for every month or part of a month on the statutory excess calculated after accounting for relevant seized money, released money, sale proceeds and liabilities. The statutory interest period begins immediately after 120 days from execution of the last authorisation and continues to completion of the relevant assessment, reassessment or recomputation, as provided in the applicable version of the law.

Explanations to Section 132B

Explanation 1 connects the meaning of the block period and execution of a search or requisition authorisation with the relevant provisions of Section 158B. Explanation 2 clarifies that existing liability does not include advance tax payable under Part C of Chapter XVII of the 1961 Act.

Section 250 of the Income-tax Act, 2025

Section 250 reorganises the corresponding rules into separate sub-sections, covering recoverable liabilities, application for release, the 120-day period, adjustment of money, recovery against other assets, alternative recovery methods, return of surplus and interest.

Under Section 250(8), the amount relevant to the interest calculation is expressed as (A - B) + (C - D), where A is money seized or requisitioned, B is money released, C is qualifying sale proceeds and D is liabilities required to be met. The statutory provisions should be consulted for the exact operation of this formula.

Practical steps when seeking release

1. Identify the date of seizure and execution of the last authorisation.
2. Collect purchase records, bank statements, books of account and other documents explaining ownership and source.
3. Submit a timely written application to the Assessing Officer identifying the assets and seeking release.
4. Request a clear statement of the existing tax demands proposed to be adjusted.
5. Keep records of correspondence, approval, release, appropriation and any interest calculation.

Official legal references

• Income Tax Department - Section 132B
• Income-tax Act, 1961 as amended by Finance Act, 2025 (official PDF)
• Income Tax Department - Search and Seizure guidance
• Income Tax Department - legislation and Income-tax Act, 2025 resources

This article is general legal information. Application of the repeal, savings and transition provisions depends on the tax year, date of search or requisition and procedural history.