Section 516 of the Income-tax Act, 2025 — Rounding Off of Total Income, Tax Payable or Refundable

In plain language

What Section 516 says in plain English

Section 516 of the Income-tax Act, 2025 is the "rounding off" rule. It tells you — and the Income-tax Department — how to smooth out awkward figures that come out of a tax computation. The rule is simple:

• First, ignore the paise. Any part of a rupee that is paise is dropped entirely.
• Then round to the nearest multiple of ₹10. Look at the last digit (the units place). If it is 5 or more, round up to the next multiple of ten. If it is less than 5 (0 to 4), round down to the lower multiple of ten.

The rounded figure becomes the official amount used on your return, assessment order or refund voucher.

What amounts does it apply to?

This is the important upgrade in the 2025 Act. Section 516 is a single consolidated provision that covers three things at once:

• Total income — the figure arrived at after all deductions and set-offs.
• Amount payable — the tax, and associated amounts, you owe.
• Amount refundable — the refund the Department pays back to you.

Under the old Income-tax Act, 1961 this was split across two sections — Section 288A (rounding of total income) and Section 288B (rounding of tax payable and refund). The 2025 Act merges both into one clean rule, which reduces confusion and interpretational disputes.

Who does it apply to?

It applies to every taxpayer — individuals, HUFs, firms, LLPs, companies, trusts and every other assessee — and to the Department itself. It is a mechanical, administrative rule; there is no exemption, no threshold and no choice involved. Whenever total income, tax payable or a refund is computed under the Act, the figure is rounded exactly as described.

Key conditions and the exact method

• Multiple of ₹10: The target is always the nearest ten rupees — never the nearest rupee, hundred or thousand.
• Paise are dropped first: So ₹2,45,678.90 becomes ₹2,45,678 before you even look at the last digit.
• "5 or more rounds up": ₹678 has a last digit of 8, so it rounds up to ₹680. ₹673 rounds down to ₹670. ₹675 rounds up to ₹680.
• Round income first, then compute tax, then round the tax: In practice you round the total income, calculate tax on the rounded income, and then round the final tax payable/refund. This is how ITR utilities are built.

How it interacts with related provisions

• Health & Education Cess and surcharge are added while computing tax; the final payable figure (after cess and surcharge) is what gets rounded under Section 516.
• TDS and advance tax credits are set off against the gross liability; the net amount payable or refundable is what you round.
• Interest under the interest sections (for late filing, deferment of advance tax, etc.) is calculated and forms part of the amount payable, which is then rounded.
• It does not change how you compute anything — it only decides the final presentation of the number.

Practical implications for a normal taxpayer

• The maximum your rounded figure can differ from the true figure is less than ₹5 either way — a genuinely trivial amount.
• Your ITR software applies this automatically, so most people never do it by hand. It matters most for manual/paper computations and for cross-checking a notice.
• A refund below ₹10 effectively rounds to zero in many practical cases, and the Department typically does not issue very small refunds.
• Because both income and tax are rounded, a ₹1 or ₹2 mismatch between your figure and the portal's figure is almost always just rounding — not an error worth worrying about.