CS Executive · Corporate Accounting and Financial Management · Accounting for Debentures
Verma Ltd issued ₹10,00,000 of 12% debentures at 1 April. Interest is payable half-yearly. On 1 October, the company redeemed ₹4,00,000 of debentures at par after paying interest due up to that date. The remaining debentures continue. TDS at 10% applies on every interest payment. What net amount is paid to holders on 31 March for the second half-year?
The net payment is ₹32,400. After redeeming ₹4,00,000, debentures of ₹6,00,000 remain, earning ₹36,000 for six months at 12%. Tax at 10% on this, ₹3,600, is withheld, leaving ₹32,400 payable to holders.
- A₹32,400Correct
- B₹36,000
- C₹54,000
- D₹21,600
Explanation
After redemption, outstanding debentures = 6,00,000. Half-year interest = 6,00,000 x 12% x 6/12 = 36,000. TDS at 10% = 3,600. Net paid = 32,400. Using ₹10,00,000 gives 60,000 gross, which ignores the redemption, and 36,000 ignores TDS.
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