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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Direct Tax Laws & International Taxation

Case: Kaveri Textiles Ltd, an Indian company, paid Rs 6,00,000 as interest to a resident bank on a term loan, and Rs 2,40,000 as rent for machinery to a partnership firm. Assume the thresholds for tax deduction at source are crossed and the payees have valid PANs. Applying the normal TDS rates (interest other than on securities at 10%, rent for plant and machinery at 2%), what is the total tax to be deducted by Kaveri Textiles?

Total TDS is Rs 64,800: 10% on Rs 6,00,000 interest gives Rs 60,000, and 2% on Rs 2,40,000 machinery rent gives Rs 4,800. The lower 2% rate applies to rent of plant and machinery, so the two amounts are added together.

  1. ARs 64,800Correct
  2. BRs 60,000
  3. CRs 4,800
  4. DRs 72,000

Explanation

Interest of Rs 6,00,000 at 10% gives Rs 60,000. Rent for plant and machinery of Rs 2,40,000 at 2% gives Rs 4,800. Total is Rs 64,800. Rs 60,000 ignores the rent TDS, and Rs 72,000 wrongly applies 10% to the rent as well (Rs 24,000 + Rs 60,000 = Rs 84,000 is not it, but 10% on only part is also wrong).

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