Taxation - DT Ch 10: Tds Tcs Advance Tax - Test 3: answer key

Question 1 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · medium

Scenario. Smt. Anuradha Sen, a resident individual aged 63 years, carries on a proprietorship business of interior design and also earns rental income. For FY 2026-27, she estimates her total income at ₹32,00,000 and tax liability before TDS at ₹7,80,000. TDS deducted by clients is ₹90,000. She pays advance tax as follows: ₹80,000 on 12 June 2026; ₹2,40,000 on 10 September 2026; ₹1,50,000 on 15 December 2026; and ₹1,10,000 on 20 March 2027. She files her return on 31 October 2027. Assume her assessed tax equals the estimated tax liability and she has not opted for presumptive taxation. She seeks your advice on advance tax liability, installment amounts, and interest under sections 234B and 234C. Ignore section 234A for this scenario.

Is Smt. Anuradha Sen liable to pay advance tax for FY 2026-27?

1. Yes, because she has business income and her tax liability exceeds ₹10,000 (correct answer)
2. No, because she is a senior citizen
3. No, because her tax liability is below ₹10,000
4. Yes, only if her TDS is less than ₹1,00,000

Answer: A — Yes, because she has business income and her tax liability exceeds ₹10,000

Explanation. Section 208 requires advance tax where tax payable is ₹10,000 or more. Section 207 exempts a resident senior citizen only if there is no income under the head profits and gains of business or profession. Smt. Anuradha has proprietorship business income, so the exemption is unavailable. Her tax payable after TDS is ₹6,90,000, exceeding ₹10,000. She is therefore liable.

Where it goes wrong. Assuming every senior citizen is exempt from advance tax without checking business income.

Authority. Section 208 (Advance Tax Liability) of the Income-tax Act, 1961; Section 207 of the Income-tax Act, 1961

Question 2 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · hard

What is the minimum advance tax payable by Smt. Anuradha Sen by 15 June 2026?

1. ₹1,17,000
2. ₹1,03,500 (correct answer)
3. ₹1,03,000
4. ₹1,00,000

Answer: B — ₹1,03,500

Explanation. Advance tax payable = ₹7,80,000 - ₹90,000 = ₹6,90,000. The first installment by 15 June is 15% of ₹6,90,000 = ₹1,03,500. The TDS is reduced before applying the installment percentages.

Where it goes wrong. Applying 15% to the gross tax liability of ₹7,80,000 instead of tax payable after TDS.

Authority. Section 211 of the Income-tax Act, 1961

Question 3 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · hard

What is the interest under section 234C for the June 2026 installment if she paid ₹80,000 by 12 June 2026?

1. ₹1,410
2. ₹2,115
3. ₹705 (correct answer)
4. Nil

Answer: C — ₹705

Explanation. Required June installment = 15% of ₹6,90,000 = ₹1,03,500. Shortfall = ₹1,03,500 - ₹80,000 = ₹23,500. Interest under section 234C is 1% per month for 3 months: ₹23,500 × 1% × 3 = ₹705.

Where it goes wrong. Charging interest for one month only or applying it to the full installment.

Authority. Section 234C of the Income-tax Act, 1961

Question 4 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · hard

What is the interest under section 234B if total advance tax paid is ₹5,80,000 and the return is filed on 31 October 2027?

1. ₹3,300
2. ₹4,400
3. ₹5,500
4. ₹7,700 (correct answer)

Answer: D — ₹7,700

Explanation. Assessed tax = ₹7,80,000 - ₹90,000 = ₹6,90,000. Advance tax paid is ₹5,80,000, which is below 90% of ₹6,90,000 (₹6,21,000). Shortfall = ₹6,90,000 - ₹5,80,000 = ₹1,10,000. Interest runs from 1 April 2027 to 31 October 2027, i.e. 7 months: ₹1,10,000 × 1% × 7 = ₹7,700.

Where it goes wrong. Using six months or computing on gross tax without reducing TDS.

Authority. Section 234B of the Income-tax Act, 1961

Question 5 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · medium

Scenario. Aryan Steels Ltd, a Pune-based company, estimates its tax liability for FY 2026-27 at ₹18,00,000. TDS deducted by customers is ₹2,40,000. The company pays advance tax of ₹2,00,000 by 15 June 2026, ₹5,00,000 by 15 September 2026, ₹10,00,000 by 15 December 2026 and ₹13,00,000 by 15 March 2027. Its return of income is due on 31 October 2027, but it is filed on 15 December 2027. The unpaid tax on the due date of filing the return is ₹2,60,000. The company’s assessed tax equals the estimated tax liability. It follows the regular four-installment scheme and does not opt for presumptive taxation. You are required to advise on the advance tax payable, installment requirements, and interest under sections 234A and 234B. Ignore section 234C for this scenario.

What is the advance tax payable by Aryan Steels Ltd for FY 2026-27?

1. ₹15,60,000 (correct answer)
2. ₹18,00,000
3. ₹13,00,000
4. ₹2,40,000

Answer: A — ₹15,60,000

Explanation. Advance tax is payable on tax liability after reducing TDS. Tax liability is ₹18,00,000 and TDS is ₹2,40,000, so advance tax payable = ₹15,60,000.

Where it goes wrong. Taking the gross tax liability without reducing TDS.

Authority. Section 208 (Advance Tax Liability) of the Income-tax Act, 1961

Question 6 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · hard

What is the minimum cumulative advance tax required by 15 December 2026?

1. ₹7,02,000
2. ₹11,70,000 (correct answer)
3. ₹12,00,000
4. ₹15,60,000

Answer: B — ₹11,70,000

Explanation. The cumulative requirement by 15 December is 75% of advance tax payable. 75% of ₹15,60,000 = ₹11,70,000. The September cumulative requirement is 45% and the March requirement is the whole amount.

Where it goes wrong. Using 45% or the whole amount instead of the 75% December percentage.

Authority. Section 211 of the Income-tax Act, 1961

Question 7 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · hard

What is the interest under section 234B if advance tax paid is ₹13,00,000 and the return is filed on 15 December 2027?

1. ₹15,600
2. ₹18,200
3. ₹23,400 (correct answer)
4. ₹26,000

Answer: C — ₹23,400

Explanation. Assessed tax = ₹18,00,000 - ₹2,40,000 = ₹15,60,000. 90% of assessed tax = ₹14,04,000. Advance tax of ₹13,00,000 is below 90%, so section 234B applies. Shortfall = ₹15,60,000 - ₹13,00,000 = ₹2,60,000. Interest from 1 April 2027 to 15 December 2027 is 9 months: ₹2,60,000 × 1% × 9 = ₹23,400.

Where it goes wrong. Counting eight months or applying interest on the gross tax liability.

Authority. Section 234B of the Income-tax Act, 1961

Question 8 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · hard

What is the interest under section 234A if the return is due on 31 October 2027 but filed on 15 December 2027, and unpaid tax on the due date is ₹2,60,000?

1. ₹2,600
2. ₹7,800
3. ₹10,400
4. ₹5,200 (correct answer)

Answer: D — ₹5,200

Explanation. The return is delayed from 1 November 2027 to 15 December 2027, which is two months for section 234A (November and part of December). Interest = ₹2,60,000 × 1% × 2 = ₹5,200.

Where it goes wrong. Counting one month only or using the gross tax instead of unpaid tax.

Authority. Section 234A of the Income-tax Act, 1961

Question 9 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Ramesh, a resident aged 66 years, has income only from interest and rent. His estimated tax liability for FY 2026-27 is ₹45,000. Is he liable to pay advance tax?

1. No, because he is a resident senior citizen without business income (correct answer)
2. Yes, because tax liability exceeds ₹10,000
3. Yes, because interest and rent are taxable
4. No, because tax liability is below ₹50,000

Answer: A — No, because he is a resident senior citizen without business income

Explanation. Section 207 exempts a resident senior citizen from advance tax if there is no income chargeable under profits and gains of business or profession. Mr. Ramesh has only interest and rent income. The ₹10,000 threshold does not override this specific exemption.

Where it goes wrong. Applying the ₹10,000 threshold without considering the section 207 exemption.

Authority. Section 207 of the Income-tax Act, 1961

Question 10 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Ms. Kavita estimates tax payable of ₹9,500 after TDS for FY 2026-27. Is she liable to pay advance tax?

1. Yes, because any tax liability attracts advance tax
2. No, because tax payable is less than ₹10,000 (correct answer)
3. Yes, because TDS is not advance tax
4. No, because she is an individual

Answer: B — No, because tax payable is less than ₹10,000

Explanation. Advance tax liability arises only where the tax payable for the year is ₹10,000 or more. Tax payable of ₹9,500 is below this threshold. Therefore, Ms. Kavita is not liable to pay advance tax.

Where it goes wrong. Assuming any positive tax liability triggers advance tax.

Authority. Section 208 (Advance Tax Liability) of the Income-tax Act, 1961

Question 11 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Sahil opts for presumptive taxation under section 44AD. His tax liability for FY 2026-27 is ₹1,20,000. When must he pay advance tax?

1. In four installments by 15 June, 15 September, 15 December and 15 March
2. By 15 December 2026
3. By 15 March 2027 in one installment (correct answer)
4. By 31 March 2027

Answer: C — By 15 March 2027 in one installment

Explanation. An assessee opting for presumptive taxation under section 44AD or 44ADA is required to pay the whole amount of advance tax on or before 15 March of the financial year. The four-installment schedule does not apply.

Where it goes wrong. Applying the regular four-installment schedule to a presumptive assessee.

Authority. Section 211 of the Income-tax Act, 1961

Question 12 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Arvind receives long-term capital gains of ₹5,00,000 in December 2026, tax on which is ₹1,00,000. He pays the tax by 31 March 2027. Is he liable to interest under section 234C on this tax?

1. Yes, because capital gains are part of total income
2. Yes, because tax was not paid in installments
3. No, because capital gains are exempt from advance tax
4. No, because capital gains arose after the due date of an installment and tax was paid by 31 March (correct answer)

Answer: D — No, because capital gains arose after the due date of an installment and tax was paid by 31 March

Explanation. Section 234C provides relief where capital gains arise after the due date of an installment and the tax is paid in the remaining installments or by 31 March. Since the gains arose in December and tax was paid by 31 March, no interest under section 234C applies on that tax.

Where it goes wrong. Ignoring the capital gains exception and charging interest for all installments.

Authority. Section 234C of the Income-tax Act, 1961

Question 13 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A company pays advance tax of 12% by 15 June and 36% by 15 September. Its tax liability is ₹10,00,000. What is the interest under section 234C for June and September?

1. Nil (correct answer)
2. ₹1,200
3. ₹2,400
4. ₹3,600

Answer: A — Nil

Explanation. The proviso to section 234C provides that no interest is payable for the June and September installments if advance tax paid is at least 12% by 15 June and at least 36% by 15 September. Here, 12% of ₹10,00,000 is ₹1,20,000 and 36% is ₹3,60,000; the stated payments meet these limits.

Where it goes wrong. Applying the normal 15% and 45% thresholds without considering the 12%/36% relief.

Authority. Section 234C of the Income-tax Act, 1961

Question 14 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Return due date is 31 July 2027. Return filed on 3 September 2027. Unpaid tax on due date is ₹50,000. What is interest under section 234A?

1. ₹500
2. ₹1,000 (correct answer)
3. ₹1,500
4. ₹2,000

Answer: B — ₹1,000

Explanation. Section 234A interest is 1% per month or part of a month on unpaid tax from the due date to the date of filing. The delay runs from 1 August 2027 to 3 September 2027, which is two months (August and part of September). Interest = ₹50,000 × 1% × 2 = ₹1,000.

Where it goes wrong. Counting only one month or computing on tax already paid before filing.

Authority. Section 234A of the Income-tax Act, 1961

Question 15 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Tax on total income is ₹10,00,000; TDS is ₹1,00,000; advance tax paid is ₹8,00,000. What is the shortfall for section 234B?

1. ₹2,00,000
2. ₹1,10,000
3. ₹1,00,000 (correct answer)
4. ₹90,000

Answer: C — ₹1,00,000

Explanation. Assessed tax = ₹10,00,000 - ₹1,00,000 = ₹9,00,000. 90% of assessed tax = ₹8,10,000. Advance tax paid is ₹8,00,000, which is below 90%. Section 234B applies on the shortfall of assessed tax less advance tax: ₹9,00,000 - ₹8,00,000 = ₹1,00,000.

Where it goes wrong. Using gross tax or applying interest on the 90% amount instead of the actual shortfall.

Authority. Section 234B of the Income-tax Act, 1961

Question 16 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Tax liability is ₹5,00,000 and TDS is ₹50,000. What is the minimum cumulative advance tax payable by 15 March 2027?

1. ₹5,00,000
2. ₹3,75,000
3. ₹2,25,000
4. ₹4,50,000 (correct answer)

Answer: D — ₹4,50,000

Explanation. Advance tax payable = ₹5,00,000 - ₹50,000 = ₹4,50,000. By 15 March, the cumulative requirement is the whole advance tax liability. Therefore, ₹4,50,000 must be paid by that date.

Where it goes wrong. Applying the gross tax liability without reducing TDS.

Authority. Section 211 of the Income-tax Act, 1961

Question 17 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Raj wins ₹2,00,000 from a lottery. TDS of ₹60,000 is deducted. He has no other income. Is he liable to pay advance tax?

1. No, because TDS covers the tax liability (correct answer)
2. Yes, because lottery income is taxable
3. Yes, because tax liability exceeds ₹10,000
4. No, because lottery income is exempt

Answer: A — No, because TDS covers the tax liability

Explanation. TDS on lottery winnings is deducted at 30%, amounting to ₹60,000. Advance tax liability arises only if tax payable after TDS is ₹10,000 or more. Here, the TDS covers the tax, leaving no advance tax liability.

Where it goes wrong. Ignoring TDS and concluding that taxable lottery income creates advance tax liability.

Authority. Section 208 (Advance Tax Liability) of the Income-tax Act, 1961

Question 18 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Tax liability is ₹4,00,000. Advance tax paid by 15 December is ₹2,00,000 against required 75% of ₹3,00,000. What is interest under section 234C for the December installment?

1. ₹1,000
2. ₹3,000 (correct answer)
3. ₹2,000
4. ₹4,000

Answer: B — ₹3,000

Explanation. Required cumulative payment by 15 December = 75% of ₹4,00,000 = ₹3,00,000. Shortfall = ₹3,00,000 - ₹2,00,000 = ₹1,00,000. Interest under section 234C for the December installment is 1% per month for 3 months: ₹1,00,000 × 1% × 3 = ₹3,000.

Where it goes wrong. Charging interest for one month or applying it to the full tax liability.

Authority. Section 234C of the Income-tax Act, 1961

Question 19 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Assessed tax is determined in regular assessment on 31 December 2027. Advance tax paid is less than 90%. From which date is interest under section 234B computed?

1. 1 April 2027 to 31 March 2028
2. 1 January 2028 to 31 December 2028
3. 1 April 2027 to 31 December 2027 (correct answer)
4. 15 March 2027 to 31 December 2027

Answer: C — 1 April 2027 to 31 December 2027

Explanation. Section 234B interest runs from 1 April following the tax year up to the date of determination of total income under section 270(1) or completion of regular assessment. Since regular assessment is completed on 31 December 2027, interest is computed from 1 April 2027 to 31 December 2027.

Where it goes wrong. Using the end of the assessment year or the date of return filing instead of the assessment date.

Authority. Section 234B of the Income-tax Act, 1961

Question 20 · 2 marks · Taxation - DT Ch 10: Tds Tcs Advance Tax · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Smt. Meera, aged 70, has business income and tax liability of ₹80,000. Is she exempt from advance tax under section 207?

1. Yes, because she is a senior citizen
2. Yes, because tax liability is below ₹1,00,000
3. No, because tax liability exceeds ₹10,000
4. No, because she has business income, so the section 207 exemption is unavailable (correct answer)

Answer: D — No, because she has business income, so the section 207 exemption is unavailable

Explanation. Section 207 exempts a resident senior citizen from advance tax only if there is no income chargeable under profits and gains of business or profession. Smt. Meera has business income, so the exemption does not apply regardless of her age.

Where it goes wrong. Assuming all senior citizens are exempt without checking for business or profession income.

Authority. Section 207 of the Income-tax Act, 1961