Skip to content

CA Intermediate · Taxation · Payment of Tax

Rao Ltd. availed and utilised ineligible ITC of Rs 1,00,000 on 10 April and reversed and repaid it with interest on 9 June (60 days after 10 April, counting from the day of utilisation). Which interest rate and amount applies under section 50 (nearest rupee)?

The interest is 24% per annum, amounting to Rs 3,945. Wrongly availed and utilised input tax credit attracts the higher rate of 24% under section 50, computed on Rs 1,00,000 for 60 days: 1,00,000 x 24% x 60/365.

  1. A24% p.a.; Rs 3,945Correct
  2. B18% p.a.; Rs 2,959
  3. C24% p.a.; Rs 2,000
  4. D18% p.a.; Rs 3,945

Explanation

Interest on ITC wrongly availed and utilised is at 24% p.a. Computation: 1,00,000 x 24% x 60/365 = Rs 3,945.2, so Rs 3,945. 18% would give Rs 2,959, which is the rate for ordinary late payment, not wrongly utilised ITC. Rs 2,000 uses 24% x 1/12 x ... a monthly approximation that is not the daily method.

Did you get it right without looking?

One question tells you little. A timed set on Payment of Tax shows your real accuracy, how long you take and where you lose marks.

Practise Payment of TaxFree diagnostic mock

More Payment of Tax questions