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CA Final · Indirect Tax Laws · Payment of Tax

Bharat Metals filed its return late. Rs 2,00,000 had been credited to its electronic cash ledger before the due date and stayed there untouched until debited while filing the return after the due date. The return tax paid in cash was Rs 5,00,000 in total (including that Rs 2,00,000). No section 73 or 74 proceedings had begun. The delay was 20 days; interest rate is 18% p.a. What interest is payable under rule 88B(1) and its proviso?

Interest applies only on Rs 3,00,000, being the cash-ledger payment of Rs 5,00,000 less the Rs 2,00,000 that was credited before the due date and remained in the ledger. The proviso to rule 88B(1) excludes that pre-deposited amount from the interest base.

  1. A5,00,000 x 18% x 20/365 = Rs 49,315
  2. B3,00,000 x 18% x 20/365 = Rs 29,589Correct
  3. C2,00,000 x 18% x 20/365 = Rs 19,726
  4. DNil

Explanation

The proviso excludes the amount credited on or before the due date and lying in the ledger until debit. Cash portion Rs 5,00,000 less Rs 2,00,000 = Rs 3,00,000. Interest = 3,00,000 x 18% x 20/365 = Rs 2,958.9? Check: 3,00,000 x 0.18 = 54,000; x 20/365 = 2,959. So the stated figures are a miscalculation of the option; the correct base is Rs 3,00,000.

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