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

Himalaya Components Private Limited (a domestic company that is not a presumptive taxpayer) estimates its tax liability for tax year 2026-27 at ₹5,00,000. It expects TDS of ₹1,00,000 to be deducted on its receipts during the year. What is the minimum cumulative advance tax it must have paid on or before 15 December 2026 to avoid a shortfall in that instalment?

The company must have paid a cumulative ₹3,00,000 by 15 December 2026. Advance tax is based on tax net of TDS, which is ₹4,00,000, and 75% of that is due by 15 December. Using gross tax of ₹5,00,000 would wrongly give ₹3,75,000.

  1. A₹3,75,000
  2. B₹3,00,000Correct
  3. C₹1,80,000
  4. D₹2,25,000

Explanation

Advance tax is computed on the tax payable after reducing TDS: ₹5,00,000 − ₹1,00,000 = ₹4,00,000. For a company, the cumulative amount due by 15 December is 75% of this, so 75% × ₹4,00,000 = ₹3,00,000. The option of ₹3,75,000 wrongly applies 75% to the gross tax without deducting TDS. The option of ₹1,80,000 is the 45% figure that applies to 15 September.

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