Skip to content

CA Intermediate · Taxation · Payment of Tax

Aarav Ltd, Chennai, a regular taxpayer, filed its return for a month showing net tax liability of Rs 1,20,000 of which Rs 20,000 was set off from credit; it paid Rs 1,00,000 in cash 30 days late. In addition, it had wrongly claimed ITC of Rs 50,000 which was reversed 40 days after the claim was utilised. Interest on excess ITC claimed and utilised is at 24% per annum. Interest rate on late payment is 18%. What is the total interest payable under the above facts (365 days, rounded to nearest rupee)?

Interest on the cash-paid tax is Rs 1,479 and interest on the wrongly utilised ITC is Rs 1,315, giving a total of about Rs 2,795.

  1. ARs 2,712Correct
  2. BRs 1,479
  3. CRs 1,233
  4. DRs 3,945

Explanation

Delayed payment interest is charged on the tax paid in cash late: Rs 1,00,000 x 18% x 30/365 = Rs 1,479.45. Interest on wrongly utilised ITC is Rs 50,000 x 24% x 40/365 = Rs 1,315.07. Total = Rs 2,794.52, which rounds to Rs 2,795, so none of the options match exactly under this method, and the setter's key uses the Rs 1,23,333 style basis incorrectly.

Did you get it right without looking?

One question tells you little. A timed set on Payment of Tax shows your real accuracy, how long you take and where you lose marks.

Practise Payment of TaxFree diagnostic mock

More Payment of Tax questions