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CS Professional · Advanced Direct Tax Laws and Practice · Computation of Total Income, Tax Liability and Filing of Return of Companies

A company pays Rs 5,00,000 towards self-assessment tax, but the tax, interest and fee payable together are Rs 6,00,000, made up of fee of Rs 10,000, interest of Rs 90,000 and tax of Rs 5,00,000. Under the Income-tax Act, 2025, how is the Rs 5,00,000 adjusted, and how much tax remains unpaid?

A short payment is adjusted first to fee, then to interest, and only the balance to tax. Here Rs 10,000 clears the fee, Rs 90,000 clears the interest, and Rs 4,00,000 goes to tax, leaving Rs 1,00,000 of tax unpaid.

  1. AFee Rs 10,000, interest Rs 90,000, tax Rs 4,00,000; tax unpaid Rs 1,00,000Correct
  2. BTax Rs 5,00,000 first; interest and fee Rs 1,00,000 remain unpaid
  3. CInterest Rs 90,000 first, then tax Rs 4,10,000; tax unpaid Rs 90,000
  4. DPro rata over fee, interest and tax in the ratio of the amounts payable

Explanation

Section 266(3) adjusts a short payment first to fee, then to interest, and the balance to tax. So Rs 10,000 goes to fee, Rs 90,000 to interest, and the remaining Rs 4,00,000 to tax. Tax unpaid is Rs 5,00,000 minus Rs 4,00,000, which is Rs 1,00,000. Adjusting to tax first is the wrong order.

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