Write a note on 'Interest on Debentures'. Interest on debentures … - Vidyadip

Question

Write a note on 'Interest on Debentures'. Interest on debentures is usually paid half yearly.

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Answer

Interest on debentures is recorded in the statement of profit or loss.

This interest is expense against profit. Interest on debentures has to be paid regularly even if the company suffers a loss or does not earn the profit.
The rate of interest payable on debentures is prefixed.
As per Income Tax Act, a company is required to deduct income tax at the prescribed rate from the gross amount of debenture interest before any amount is paid to the debenture holdeRs.
This tax amount is to be deposited with the income tax department on behalf of the debenture holdeRs.
It is known as Tax deducted at Source $(TDS).$ While preparing the final accounts for an accounting period provision or effects must be made for any accrued interest on debentures due to variations of the dates.

If a company pays interest on debentures on half-yearly period and interest remains unpaid it will be called 'Interest accrued and due'.

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