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CA Intermediate · Taxation · Payment of Tax

Gupta Enterprises, a monthly return filer, had net tax liability payable in cash of Rs 2,00,000 for a month, due on 20th. It paid the entire amount 30 days late. Assuming no reduction on account of ITC wrongly availed, what is the interest under section 50 at 18% p.a. (nearest rupee)?

Interest is Rs 2,959. Under section 50 interest on delayed tax payment is 18% per annum, calculated on the tax paid late for the days of delay: 2,00,000 x 18% x 30/365, which is about Rs 2,959.

  1. ARs 2,959Correct
  2. BRs 3,000
  3. CRs 1,973
  4. DRs 3,600

Explanation

Interest = 2,00,000 x 18% x 30/365 = 36,000 x 30/365 = Rs 2,958.9, i.e. Rs 2,959. Rs 3,000 uses a 360-day year, and Rs 3,600 treats 18% for a full month at 1.5% on 2,00,000 times 1.2 incorrectly... Rs 1,973 uses 12% instead of 18%.

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