Para 3.13.27 — MSO (Audit)
Original Rule Text
3.13.27 In the course of audit of these interest vouchers, it should be verified that:
(i) the amount entered in the voucher as the half-yearly interest in fact represents one half year’s interest due on the amount of the loan mentioned in each promissory note;
(ii) the total amount due is the half year’s interest multiplied by the number of half years as entered in the column provided for the purpose;
(iii) the amount shown as being due in the voucher has been correctly computed;
(iv) the receipt is properly signed, either by the person named as the holder or by his representative; and
(v) income tax at the maximum rate has been deducted from the interest due unless the owner of the security has produced with his receipt for interest a declaration under Section 193 or 197A of the Income Tax Act, 1961, or a certificate issued by the Income Tax Officer authorising exemption from tax or levy of a lower rate of tax.
# B. Interest on loans from autonomous bodies
What This Means
When auditing interest vouchers on government securities, auditors must verify five specific things: that the half-yearly interest matches the loan amount on the promissory note, that the total due is correctly computed for the number of half-years, that the receipt is properly signed by the holder or their representative, and that income tax at the maximum rate has been deducted unless the holder has a valid exemption certificate under the Income Tax Act.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Half-yearly interest must correctly correspond to the loan amount on each promissory note
- 2Total amount must equal half-year's interest multiplied by the number of half-years claimed
- 3Overall computation must be arithmetically correct
- 4Receipt must be signed by the named holder or an authorised representative
- 5Income tax must be deducted at maximum rate unless exemption under Section 193 or 197A of IT Act is produced
Practical Example
An auditor examines an interest voucher for a government bond with a face value of Rs 10 lakh at 7% per annum. The half-yearly interest should be Rs 35,000. The voucher claims payment for 2 half-years, so the total should be Rs 70,000. The auditor verifies this calculation, checks that the payee's signature matches the registered holder, and confirms that TDS of Rs 7,000 (10% on Rs 70,000) was correctly deducted -- or if not, that a valid Section 197A declaration was attached.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
What is Section 197A of the Income Tax Act?▼
Why is income tax deducted at the maximum rate by default?▼
What if the receipt is signed by a representative rather than the holder?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.