Section 250 of the Income-tax Act, 2025 — Application of Seized or Requisitioned Assets

In plain language

What Section 250 is about

When the Income-tax Department carries out a search (raid) under Section 247 or a requisition under Section 248, it often takes away cash, jewellery, gold, bank lockers' contents and other valuables. Section 250 of the Income-tax Act, 2025 is the rule book that decides what the Department can do with those seized or requisitioned assets — how much it may keep against your tax dues, when it must give the balance back, and the interest it must pay you if it delays. It is the successor to the well-known Section 132B of the Income-tax Act, 1961, and carries forward the same scheme with the drafting cleaned up.

Who it applies to

• Any person whose assets have been seized in a search under Section 247 (raid) or requisitioned under Section 248 (assets held by another authority such as police/customs handed over to the tax officer).
• The Assessing Officer (AO), Tax Recovery Officer and higher authorities who administer recovery.
• It is a tax-administration / recovery provision — it does not create a fresh tax, it only governs how already-seized property is used to satisfy dues.

Which liabilities can be recovered from the assets

Under sub-section (1), the AO may adjust the seized assets against:

• Existing liability — tax, interest or penalty already outstanding under the Income-tax Act (and older laws like Wealth-tax) on the date of seizure. Advance tax is expressly excluded.
• Fresh liability determined on completion of the assessment or reassessment or recomputation arising out of that very search or requisition, including any penalty and interest.
• Liability arising from proceedings before the Interim Board for Settlement.

The taxpayer's escape route — the 30-day application

The most useful part for an honest taxpayer is the proviso allowing release before adjustment. If, within 30 days from the end of the month in which the asset was seized, you make an application and explain the nature and source of the seized asset to the AO's satisfaction (i.e. it is already disclosed/accounted-for income), the asset (or the part so explained) may be released after meeting any existing liability, with the approval of a senior officer (Principal Chief Commissioner / Chief Commissioner / Principal Commissioner / Commissioner).

How money and other assets are applied

• If the seized asset is money (cash): the AO applies it directly against the liabilities, and you are discharged of that liability to the extent of the money applied.
• If the asset is not money (gold, jewellery, shares): the remaining undischarged liability may be recovered by treating the asset as being "under distraint" — effectively attached — and sold in the prescribed manner by the AO or Tax Recovery Officer.

The 120-day release deadline and interest

This is the taxpayer-protection heart of Section 250:

• Assets not required to meet liabilities must be released within 120 days from the date the last authorisation for the search or requisition was executed.
• Any excess money remaining after all liabilities are met is returned; on such excess the Central Government pays simple interest at 0.5% per month or part of a month.
• Interest runs from the date immediately after 120 days from execution of the last authorisation, up to the date the assessment/recomputation is completed. The excess is computed using the statutory formula (broadly: money seized minus liabilities finally discharged).

Practical implications

• Keep proof of source ready. The 30-day window is short; documentary evidence (bank statements, sale deeds, past ITRs) is what gets your gold or cash released quickly.
• Cash adjustment reduces your dues rupee-for-rupee, so a large seizure can effectively pre-pay your assessed demand.
• Watch the calendar. If the Department holds your money beyond the deadline, 0.5% monthly interest (6% per annum) is your statutory compensation — track the last-authorisation date.