Section 238 of the Income-tax Act, 1961: Who Can Claim a Refund in Special Cases?
Section 238 identifies the person legally entitled to claim or receive an income-tax refund when income is assessed in another person's hands or the original taxpayer cannot claim the refund because of death, incapacity, insolvency, liquidation or another cause.
Meaning and purpose of Section 238
Ordinarily, a refund arises where tax paid or collected exceeds the tax properly chargeable. Section 237 sets out the general entitlement to a refund. Section 238 deals with special circumstances in which someone other than the person who originally earned income or paid tax may be the appropriate claimant.
The provision distinguishes between (a) income legally included in another person's total income and (b) a person unable to claim or receive a refund, in which case an authorised representative may act for that person or the estate. The section establishes entitlement; it does not itself remove applicable filing, verification or limitation requirements.
Section 238: Explanation of each subsection
Section 238(1): Income included in another person's assessment
Where one person's income is included, under any provision of the Act, in another person's total income, the latter person alone is entitled to a refund under the refund chapter in respect of that income.
For example, where income is lawfully clubbed with another person's income under the applicable clubbing provisions, the refund entitlement associated with that included income is determined by Section 238(1). The mere fact that a person received the money does not override the statutory treatment of the income.
Section 238(1A): Historical fringe-benefit-tax rule
Subsection (1A), inserted by the Finance Act, 2005 with effect from 1 April 2006, addressed cases where fringe benefits provided or deemed to be provided by one employer were included in the taxable value of fringe benefits of another employer under the former Chapter XII-H. In such cases, the latter employer alone was entitled to the relevant refund.
Historical context: Fringe benefit tax was abolished with effect from assessment year 2010-11. This subsection is therefore relevant primarily when interpreting legacy periods or historical proceedings; it should not be read as creating a current fringe-benefit-tax liability.
Section 238(2): Death, incapacity, insolvency or liquidation
Where a person is unable to claim or receive a refund because of death, incapacity, insolvency, liquidation or another cause, the person's legal representative, trustee, guardian or receiver, as applicable, may claim or receive the refund for the benefit of that person or the person's estate.
The entitlement is representative, not a personal windfall: the refund is to be dealt with for the benefit of the rightful taxpayer or estate, subject to the governing succession, insolvency, guardianship or liquidation law.
| Situation | Person generally entitled to act | Important consideration |
|---|---|---|
| Income clubbed in another person's total income | Person whose total income includes that income | Section 238(1) governs refund entitlement in respect of the included income. |
| Taxpayer dies | Legal representative | Refund is claimed or received for the estate; representative status must be established. |
| Taxpayer lacks legal capacity | Lawful guardian or other authorised representative | Authority and supporting documents depend on the circumstances. |
| Insolvency or liquidation | Trustee, receiver, liquidator or other legally authorised person | Applicable insolvency or company-law rules govern control and distribution. |
| Historical fringe-benefit-tax inclusion | Employer in whose fringe-benefit value the amount was included | Legacy subsection (1A), not an ordinary present-day FBT claim. |
How to claim a refund on behalf of another person
- Identify the applicable tax year and law. Confirm whether the claim concerns an earlier assessment year under the 1961 Act or a tax year under the 2025 Act.
- Establish legal entitlement. Collect relevant evidence, such as a death certificate, proof of legal-heir status, guardianship order, insolvency appointment or liquidation authority, as appropriate.
- Review the return and refund position. Reconcile TDS, TCS, advance tax, self-assessment tax, assessment orders and any outstanding demands.
- Complete applicable registration and verification. Use the Income Tax Department's authorised representative or legal-heir process where required; follow the portal's current instructions.
- File or pursue the appropriate claim. Observe the relevant return-filing, refund-claim, rectification, appeal or condonation provisions. Section 238 does not independently extend limitation periods.
- Check the final order and bank details. Ensure the refund is received and accounted for by the person or estate legally entitled to it.
For practical filing guidance, visit the official Income Tax e-Filing portal and its Help section.
Illustrative examples
Example 1: Refund connected with clubbed income
Suppose income of Person A is included under the applicable law in Person B's taxable income. If the assessment and taxes attributable to that income give rise to a refund, Section 238(1) identifies Person B as the claimant in respect of the included income. The actual amount depends on the tax computation and credits properly available.
Example 2: Refund after a taxpayer's death
A taxpayer files a return showing a refund of Rs. 24,000 but dies before receiving it. An eligible legal representative may complete the required procedures and claim or receive the amount for the benefit of the deceased person's estate, subject to verification and any lawful adjustments.
Example 3: Company in liquidation
If a company becomes entitled to a refund while under liquidation, the person legally empowered to act for the company may pursue the claim, subject to applicable tax and liquidation procedures. The refund remains subject to the legal rules governing the company's assets.
Related refund provisions and official resources
- Section 237: General right to a refund where tax paid exceeds tax chargeable.
- Section 239: Rules concerning refund claims and applicable time limits.
- Section 240: Refund becoming due as a result of appeal or other proceedings.
- Section 244A: Interest on refunds in applicable circumstances.
- Section 245: Adjustment or set-off of refunds against amounts payable, subject to statutory conditions.
Authoritative references: Income Tax Department, e-Filing portal, and India Code for the text of central legislation. Check the version applicable to the tax year and proceedings involved.
Frequently asked questions
Can a legal heir claim a deceased person's income-tax refund?
Yes. Section 238(2) permits a legal representative to claim or receive a refund due to a deceased person for the benefit of the estate, subject to procedural and documentary requirements.
Who claims the refund if income is clubbed with another taxpayer's income?
Under Section 238(1), the person in whose total income that income is included is the person entitled to the refund in respect of it.
Does Section 238 itself set a refund-claim deadline?
No. The applicable deadline and claim procedure arise from other relevant provisions, rules and administrative processes.
Does Section 238(1A) still impose fringe benefit tax?
No. It reflects a historical rule associated with the former fringe benefit tax regime.
Editorial note: This is general legal information, not an individual assessment of entitlement. Verify statutory amendments, tax-year applicability, representative capacity and current portal procedures before filing.