The acceptance of resignation came 45 days after Kejriwal deposited over Rs nine lakh as dues to settle the issue.
"The government has finally accepted my resignation from the Income Tax Department. I received the letter today," Kejriwal told PTI. He had quit the IRS in February 2006.
Kejriwal, who was a joint commissioner in the IT Department when he quit, had earlier said he will fight in court to retrieve the money he had paid as dues.
He had on November three submitted a cheque of over Rs 9,27,787 along with a letter to Prime Minister Manmohan Singh, asking him not to trouble his six friends who had given him an interest-free loan to settle his dues.
The 43-year-old activist, a 1995-batch IRS officer, had decided to settle the dues in an attempt to blunt attacks by his detractors.
Government has claimed that he had violated bond rules by quitting the service before completing mandatory three years of service after going on a study leave on full pay. However, Kejriwal said he took non-paid leave and quit the service after serving bond conditions.
Kejriwal had taken study leave on full pay for two years from November 1, 2000 after signing a bond that he would return the salary if he resigns or retires or fails to resume duty within three years of his study leave. He rejoined on November 1, 2002 but took non-paid leave after 18 months.
Government argued that taking leave after 18 months was violation of bond conditions but this was contested by Kejriwal who claimed that he did not "violate" any bond provisions and resigned from the job after the stipulated three years of rejoining duty following his study leave.
The Office of the Chief Commissioner of Income Tax (CCIT) had on August five issued notice to Kejriwal asking him to pay Rs 9.27 lakh, which Kejriwal and other Team Anna members had termed as an action of the government's "dirty tricks department" under instructions from political bosses.
Kejriwal had said he has been trying to convince the government for the past five years that he has not committed any wrong.
The Income Tax department had set October 27 as the deadline for him to pay the dues but he had failed to comply with it, saying he needed more time to consult his friends to take a final decision on the matter. He finally cleared the dues on November 3.