Following Journal entry is to be passed when interest on debentures become due and tax is deducted at source:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Debenture Interest A/c Dr., to Income Tax payable A/c and to Debentureholders A/c
Interest on debentures is an expense of the company for the full amount due, so Debenture Interest A/c is debited with the gross interest. The company must deduct tax at source and pay it to the government, so that part is a liability credited to Income Tax payable A/c; the rest is owed to the debentureholders and credited to them.
Debenture Interest A/c Dr.
To Income Tax payable A/c
To Debentureholders A/c
(Amount of interest due on debenture and tax deducted at source)
The entry is passed when the interest becomes due; Bank A/c is credited only later, when the interest is actually paid.
NCERT (2026-27 edition):
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