Tax liability due to interest can be adjusted by creating a journal for interest payable.
To record journal entry to account for interest payable
1. Go to Gateway of Tally > Accounting Vouchers > F7: Journal.
Note: You can create a journal voucher from Gateway of Tally > Display > Statutory Reports > VAT > select the VAT or CST form.
2. Click J: Stat Adjustment. In the Stat Adjustment Details screen,
o Select the option VAT in the field Type of duty/tax.
o Select the option Increase of Tax Liability in the Nature of Adjustment field.
o Select Interest for the option Additional Details.
o Press Ctrl+A to save and return to the voucher creation screen.
3. Press Enter to return to voucher.
4. Debit an expense ledger created under Indirect Expenses with option Is VAT/CST Applicable? set to Not Applicable.
5. Credit the ledger created under Current Liabilities. The completed screen appears as shown below:
6. Press Enter to save.