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

Ganga Textiles Ltd pays Rs. 40,000 towards self-assessment dues of Rs. 55,000, comprising fee Rs. 5,000, interest Rs. 20,000 and tax Rs. 30,000. Under the Income-tax Act, 2025, how is the Rs. 40,000 adjusted?

The payment is adjusted first towards fee (Rs. 5,000), then interest (Rs. 20,000), and the balance of Rs. 15,000 goes to tax, leaving Rs. 15,000 of tax unpaid, because section 266(3) prescribes the order fee, interest, tax.

  1. ARs. 5,000 to fee, Rs. 20,000 to interest, Rs. 15,000 to taxCorrect
  2. BRs. 30,000 to tax, Rs. 10,000 to interest, nothing to fee
  3. CRs. 20,000 to interest, Rs. 20,000 to tax, nothing to fee
  4. DProportionately to fee, interest and tax in the ratio 5:20:30

Explanation

Section 266(3) adjusts a short payment first to fee, then interest, then tax. Fee 5,000 leaves 35,000; interest 20,000 leaves 15,000, which goes to tax. Tax of Rs. 15,000 remains unpaid.

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