Rashish invests ₹5000 for 3 years at 5% p.a. compounded interest reckoned yearly. Income tax at the rate of 20% on the interest earned is deducted at the end of each year. Find the total interest at the end of third year.

Correct option is A

Given: Principal = ₹5000, Original Rate = 5%, Time = 3 years, Tax = 20% deducted from the interest yearly.

Formula: Effective Rate = Original Rate × (100% - Tax%). Total Amount = Principal × (1 + Effective Rate / 100)³.

Solution:
Calculate the effective rate of interest after the 20% tax deduction:
Effective Rate = 5% × (100% - 20%) = 5 × 0.80 = 4%.

Calculate the total amount at the end of 3 years using Compound Interest formula:
Amount = 5000 × (1 + 4/100)³
Amount = 5000 × (1.04)³
Amount = 5000 × 1.124864 = 5624.32

Calculate the total interest earned:
Total Interest = Amount - Principal
Total Interest = 5624.32 - 5000 = 624.32

Final Answer: ₹ 624.32

So the correct answer is (a)