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Please find below the replies:
1. Yes,it is possible. You can pay last year tax outstanding in current year subject to followings:
Section 245 gives powers to the Income Tax Department to adjust any previous year’s demand of tax payable with the current year’s refund. But to exercise this power, it’s mandatory on their part to send intimation u/s 245 to the taxpayers and give them opportunity to submit their response on it whether they agree with it or not.
In other words, if you owe income tax department, then they will adjust the amount you owed in the current year’s refund. But before adjusting that amount they will send you a notice u/s 245, stating that they are adjusting your refund with the previous years outstanding amount. You have to submit your response on it that whether you agree with department or not.
NOTE: The outstanding amount will be adjusted when refund is generated. That means even if the refund generated after 5 years, the refund will be adjusted then.
*Better to revise the previous return and pay the outstanding tax with interest.
2.Yes, It is normal under tax processing.They will pay interest on refund amount.
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