Rounding off of taxable income and tax has been prescribed under section 288A and 288B of IT act, 1961.
According to section 288A you need to round off your taxable income to the nearest multiple of 10 rupees. While deriving paise should be ignored.
Section 288B talks about rounding off of tax payable or refund. According to this section, any amount of tax payable or refund has to be rounded off to the nearest multiple of 10 rupees. Here also paise should be ignored while deriving tax payable or refund.
What is rounding off and how it works
Rounding off is a technique which is used to approximate values. It’s used to limit the use of decimal point after a certain number. While calculating taxable income you have to approximate the value to the nearest rupees of 10 i.e. if after taking out paise from this amount, it is less than the multiple of 5 then it should be rounded off to the previous multiple of rupees 10. If the taxable amount is more than the multiple of Rs. 5 or exactly 5 then it should be rounded off to the next multiple of 10 rupees.
Same logic is applicable while calculating tax payable or refund.
Example of rounding off
Suppose after calculating taxable income of an individual you reached at a figure of Rs. 5, 60, 004. In this case you need to round it off to the nearest Rs. 10 i.e. Rs, 5, 60, 000. If the same taxable income is derived as Rs. 5, 60, 009 then it should have been rounded off to Rs. 5, 60, 010 as the nearest value of multiple of 10 rupees is Rs. 5, 60, 010.
