CMA Final · Direct Tax Laws and International Taxation · Collection, Recovery and Refund of Tax
Sharma Motors sells a motor vehicle to a buyer for a sale consideration of Rs 18,00,000. Applying section 394(1) of the Income-tax Act, 2025, the tax to be collected at source by the seller is:
Tax collected at source is Rs 18,000. Because the vehicle's sale consideration of Rs 18 lakh exceeds Rs 10 lakh, the 1% rate applies to the entire consideration, not just the excess over Rs 10 lakh.
- ARs 8,000
- BRs 18,000Correct
- CRs 36,000
- DRs 1,80,000
Explanation
Sl. No. 6 applies where sale consideration of a motor vehicle exceeds Rs 10 lakh, at 1%. The rate applies to the whole consideration: 1% of 18,00,000 = Rs 18,000. Rs 8,000 wrongly applies 1% only to the excess over Rs 10 lakh. Rs 36,000 uses 2%.
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