CMA Final · Direct Tax Laws and International Taxation · Collection, Recovery and Refund of Tax
Under the Income-tax Act, 2025, Anand Motors sells a motor vehicle to a resident buyer for Rs 14,00,000. On what basis is tax collected at source by the seller?
Tax is collected at 1% on the entire Rs 14,00,000, giving Rs 14,000. Because the consideration exceeds Rs 10 lakh, the rate applies to the full sale consideration, not merely the excess over the threshold.
- A1% of Rs 14,00,000, i.e. Rs 14,000Correct
- B1% of Rs 4,00,000 (excess over Rs 10 lakh), i.e. Rs 4,000
- C2% of Rs 14,00,000, i.e. Rs 28,000
- DNo collection, as the buyer gave no declaration
Explanation
Item 6 applies where sale consideration exceeds Rs 10 lakh, at 1%. Once the threshold is crossed, the rate applies on the whole consideration: 1% x 14,00,000 = Rs 14,000. Collecting only on the excess is wrong because the provision is not stated on the excess.
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