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CA Intermediate · Taxation · Tax Deduction or Collection at Source and Advance Tax

Gupta & Sons, a resident firm, credits Rs 45,000 as interest (other than interest on securities) to Mr. Joshi, a resident individual, on a bank-type deposit with the firm during tax year 2026-27. Mr. Joshi has not furnished his PAN. Assume the normal TDS rate on such interest is 10%, the threshold is not crossed in the sense that tax is deductible, and where PAN is not furnished tax is deducted at the higher of the rate in the Act, the rate in force and 20%. What is the TDS amount?

TDS is Rs 9,000. Since Mr. Joshi did not furnish his PAN, tax must be deducted at the higher of the normal 10% rate and 20%, which is 20%. Applying 20% to Rs 45,000 gives Rs 9,000.

  1. ARs 9,000Correct
  2. BRs 4,500
  3. CRs 2,250
  4. DRs 22,500

Explanation

Because PAN is not furnished, tax is deducted at the higher of the applicable rate (10%) and 20%, i.e. 20%. TDS = 20% x 45,000 = Rs 9,000. Rs 4,500 uses the normal 10% rate, ignoring the PAN default.

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