Mr. A has invested Rs. 1,00,000 in 9% tax-free debentures of a company. Interest accrues on 1st January…
The taxable interest is Rs. 10,000. On tax-free debentures of a company the company bears the tax, so the investor receives the stipulated interest net of tax: Rs. 1,00,000…
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Mr. A has invested Rs. 1,00,000 in 9% tax-free debentures of a company. Interest accrues on 1st January of every year. If the rate of deduction of tax at source is 10%, his taxable income from these debentures for the tax year 2026-27 under the Income-tax Act, 2025 will be
Answer and explanation
Correct answer B
The taxable interest is Rs. 10,000. On tax-free debentures of a company the company bears the tax, so the investor receives the stipulated interest net of tax: Rs. 1,00,000 × 9% = Rs. 9,000. Because the tax paid on his behalf is also his income, the net interest is grossed up at the 10% rate: Rs. 9,000 ÷ 0.90 = Rs. 10,000. Rs. 9,000 leaves out the tax borne by the company, and Rs. 11,000 exceeds the grossed-up amount.
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Telangana SET (TG SET)