CA Intermediate · Taxation · Tax Deduction or Collection at Source and Advance Tax
Aarav Industries Ltd., a domestic company, estimates its tax payable for tax year 2026-27, after TDS, on regular income at Rs 4,00,000 including cess, and pays advance tax instalments exactly as required on that basis. On 20 December 2026 it sells a long-term asset, and the tax on the resulting capital gain, including cess, is Rs 52,000. Assuming no other change in estimate, what minimum cumulative advance tax must it have paid by 15 March 2027 to avoid interest for deferment on this gain?
The company must have paid Rs 4,52,000 cumulatively by 15 March 2027. Tax on the capital gain arising after 15 December can be paid entirely in the remaining March instalment without interest, so Rs 52,000 is added in full to the Rs 4,00,000 regular advance tax liability.
- ARs 4,00,000
- BRs 4,39,000
- CRs 4,52,000Correct
- DRs 3,52,000
Explanation
The gain arose after the 15 December instalment date, so the tax on it need only be paid in the remaining instalment, i.e. by 15 March, and no interest arises if it is paid then. The regular tax of Rs 4,00,000 must be fully paid by 15 March, so the cumulative payment required is 4,00,000 + 52,000 = Rs 4,52,000. Rs 4,39,000 wrongly applies the 75% December percentage to the gain, and Rs 4,00,000 ignores the gain.
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