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

Zenith Traders Pvt Ltd estimates its net tax liability for tax year 2026-27, after TDS, at Rs 4,00,000. It paid Rs 50,000 by 15 June 2026 and a cumulative Rs 1,20,000 by 15 September 2026. Ignoring any other exception, what is the interest for default in the instalment due on 15 September 2026, calculated at 1% per month?

The interest is Rs 1,800. Cumulative advance tax due by 15 September is 45% of Rs 4,00,000, which is Rs 1,80,000, against Rs 1,20,000 paid. The shortfall of Rs 60,000 attracts 1% per month for three months.

  1. ARs 600
  2. BRs 1,200
  3. CRs 1,800Correct
  4. DRs 3,600

Explanation

The cumulative amount required by 15 September is 45% of Rs 4,00,000, which is Rs 1,80,000. The shortfall is Rs 1,80,000 - Rs 1,20,000 = Rs 60,000. Interest runs for 3 months at 1% per month, so it is 60,000 x 1% x 3 = Rs 1,800. Rs 1,200 wrongly uses only 2 months.

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