Rounding Off of Income and Tax: Section 516 of the Income Tax Act 2025

Section 516 of the Income Tax Act 2025 says that total income, and any amount payable or refundable under the Act, is rounded off to the nearest multiple of Rs 10. Paise are dropped first. Then a last digit of 5 or more rounds up to the next ten, and a last digit below 5 rounds down. The rounded figure is treated as the legal figure for the assessee.

This guide explains the rule step by step, shows where it applies, and covers the separate rounding rule for interest calculations in rule 269 of the Income-tax Rules, 2026. Everything below comes from the Act (as amended by the Finance Act 2026) and the Rules. Examples use tax year 2026-27.

What does section 516 of the Income Tax Act 2025 say?

Section 516 applies to three kinds of amounts:

• the total income computed under the Act (the figure on which tax rates are applied);
• any amount payable under the Act, such as tax or interest due;
• any amount refundable under the Act.

The section ends by saying the rounded amount is deemed to be the total income, or the amount payable or refundable. So the rounded figure is not just a display choice. It is the figure the law uses from then on.

How is an amount rounded off under section 516?

There are two steps, in this order.

1. Ignore the paise. Any part of a rupee consisting of paise is dropped, not rounded. Rs 45,675.99 becomes Rs 45,675.
2. Round to a multiple of Rs 10. If the last figure is 5 or more (section 516(a)), the amount goes up to the next multiple of 10. If it is less than 5 (section 516(b)), it goes down to the previous multiple of 10. If it is already a multiple of 10, nothing changes.

Amount	After dropping paise	Last figure	Rounded amount
Rs 45,672.80	Rs 45,672	2	Rs 45,670
Rs 45,675.00	Rs 45,675	5	Rs 45,680
Rs 45,675.99	Rs 45,675	5	Rs 45,680
Rs 45,679.60	Rs 45,679	9	Rs 45,680
Rs 45,680.40	Rs 45,680	0	Rs 45,680

Worked example 1: rounding total income

Assumption: Ravi's total income for tax year 2026-27 comes to Rs 12,34,565.75 after all deductions.

Step	Working	Result
1. Drop paise	12,34,565.75 less 0.75	Rs 12,34,565
2. Last figure	5, which is 5 or more	Round up
3. Next multiple of 10	12,34,565 + 5	Rs 12,34,570

Rs 12,34,570 is Ravi's total income for the purposes of the Act. Tax rates are applied to this figure.

Worked example 2: rounding tax payable and a refund

Assumptions: for tax year 2026-27, Meena's return shows balance tax payable of Rs 8,742.45. Her colleague Arun's return shows a refund of Rs 18,255.40.

	Meena (payable)	Arun (refundable)
Computed amount	Rs 8,742.45	Rs 18,255.40
After dropping paise	Rs 8,742	Rs 18,255
Last figure	2 (below 5)	5 (5 or more)
Direction	Down, section 516(b)	Up, section 516(a)
Amount deemed payable / refundable	Rs 8,740	Rs 18,260

The rule cuts both ways. Rounding can reduce what a taxpayer pays by a few rupees, or increase it by a few rupees.

Real-life example: why the paise do not get rounded first

Sunita is a freelance designer. Her tax calculation ends at Rs 29,994.70. Her first instinct is to round 94.70 up to 95 and then treat the amount as Rs 29,995, which would round up to Rs 30,000. That is the wrong order. Under section 516 the paise are ignored first, leaving Rs 29,994. The last figure is 4, so the amount rounds down to Rs 29,990. Rounding paise up first would have overstated her tax by Rs 10.

Real-life example: a refund that rounds in the taxpayer's favour

Imran has excess advance tax and a computed refund of Rs 6,305.30. Dropping paise gives Rs 6,305. The last figure is 5, so the refund is rounded up to Rs 6,310. The refund he is entitled to under the Act is Rs 6,310, not Rs 6,305.30.

Does the same rounding apply to interest calculations?

Not exactly. Rule 269 of the Income-tax Rules, 2026 (made under section 533(2)(u)) has its own method for calculating interest, whether the assessee pays it or the Central Government pays it to the assessee. Section 516 then applies to the interest amount that results, because interest payable is an amount payable under the Act.

Rule 269 clause	What it does
(a) Interest on an annual basis	The period is rounded to whole months. Any fraction of a month is ignored.
(b) Interest for every month or part of a month	Any fraction of a month counts as a full month.
(c) The amount on which interest runs	The tax, penalty or other sum is rounded to the nearest multiple of Rs 100. Any fraction of Rs 100 is ignored (so it goes down).

Note the difference in clause (c). Section 516 rounds to Rs 10 and rounds up when the last figure is 5 or more. Rule 269(c) rounds the base to a multiple of Rs 100 by ignoring the fraction, which means rounding down.

Worked example 3: interest base and period under rule 269

Assumptions: the tax on which interest runs is Rs 1,23,456. The interest is chargeable for every month or part of a month, for a period of 2 months and 5 days. The 1% a month rate below is only a round figure chosen to show the arithmetic. It is not taken from any section.

Step	Working	Result
1. Base under rule 269(c)	1,23,456, ignore the Rs 56 fraction of Rs 100	Rs 1,23,400
2. Period under rule 269(b)	2 months 5 days, part month counts as full	3 months
3. Interest at an illustrative 1% a month	1,23,400 x 1% x 3	Rs 3,702
4. Section 516 on the interest	Last figure 2, round down	Rs 3,700

If the same interest were calculated on an annual basis under clause (a), the 5 days would be ignored and the period would be 2 months.

Quick reference

Question	Answer	Where
What is rounded?	Total income, amounts payable, amounts refundable	Section 516
Rounded to	Nearest multiple of Rs 10	Section 516
Paise	Ignored first	Section 516
Last figure 5 or more	Round up to next ten	Section 516(a)
Last figure below 5	Round down to previous ten	Section 516(b)
Interest base	Multiple of Rs 100, fraction ignored	Rule 269(c)
Interest period	Whole months, as per clause (a) or (b)	Rule 269(a), (b)

What are the common mistakes with rounding?

• Rounding paise up before rounding to Rs 10. Paise are ignored, never rounded, so Rs 29,994.70 is Rs 29,994 and not Rs 29,995.
• Using Rs 100 rounding for tax. Rs 100 rounding in rule 269(c) is only for the base on which interest is calculated.
• Treating Rs 5 as a round-down. A last figure of exactly 5 rounds up.
• Rounding each line item. The section rounds the computed total income and the final amount payable or refundable. Rounding every deduction or receipt separately can change the result.
• Mixing up the period rules. Annual-basis interest ignores part months, while month-or-part-of-a-month interest counts them as full months.

How do CA firms handle rounding across many returns?

Return utilities usually apply the rounding themselves, so the practical risk is in manual workings, notices replies and client tax estimates, where a Rs 10 difference can cause a mismatch with the department's figure. Finexo's practice management software helps a CA firm keep client work, deadlines and notes in one place, so the final rounded figures sit alongside each client's file. It does not compute tax for you.

Where is this in the Act?

• Section 516, Income Tax Act 2025: rounding off of total income and amounts payable or refundable (clauses (a) and (b)).
• Section 533(2)(u): rule-making power for the procedure to calculate interest.
• Rule 269, Income-tax Rules, 2026: rounding of the interest period and the amount on which interest is calculated.

This article explains the Income Tax Act 2025 (as amended by the Finance Act 2026) and the Income-tax Rules, 2026. It is general information, not tax advice. Confirm the position for a specific case with a qualified chartered accountant.