CMA Intermediate · Direct and Indirect Taxation
Deductions, Rebate and Relief for CMA Inter Taxation
This chapter explains how you move from Gross Total Income to tax payable. You subtract allowed deductions to reach total income, compute tax, then reduce it by rebate and relief. To solve questions, follow that sequence, check each condition and limit, and use the Income-tax Act, 2025 terms and section numbers.
What this chapter covers
This chapter sits in the middle of the income-tax computation. Earlier chapters teach you to compute income under the five heads and to clubbing and set-off. This chapter takes the Gross Total Income and shows what can be subtracted before tax is computed, and what can be subtracted from the tax itself.
There are three layers. Deductions reduce income. Rebate reduces the tax computed on total income, for eligible resident individuals within an income limit. Relief reduces tax where the same income is taxed in India and abroad, or in other specified cases. Mixing up the layer is the most common way to lose marks.
The chapter also ends with the general anti-avoidance rule on impermissible avoidance arrangements. This is theory-heavy and is usually answered in a short descriptive format. The whole chapter feeds into the final tax computation questions of the paper, so errors here carry into every total income and tax liability answer. Always use the Income-tax Act, 2025 and the tax year 2026-27, and check the regime that the question assumes, because many deductions are available only under certain regimes.
Almost every individual or company computation question ends with deductions, rebate or relief, so this chapter touches marks even when it is not the headline topic. A numerical question can be correct up to Gross Total Income and still lose step marks if you apply a limit wrongly or subtract a rebate at the wrong stage. The anti-avoidance topic also gives scoring theory answers and MCQs. Time spent here pays back across the whole paper, and the rules are conditional and limit-based, which suits systematic revision.
Deductions, Rebate and Relief: topics in the order to study them
- 1Gross Total Income and Deductions FrameworkStart here to see where deductions fit between Gross Total Income and total income, and the general conditions and ceilings that apply.
- 2Deductions for Savings, Investments and PaymentsThese are the most frequently tested deductions, and you need the framework first to apply the limits and overall ceilings.
- 3Deductions for Specified Incomes and PersonsLearn these next because they depend on the type of income or the taxpayer, and build on the same framework.
- 4Rebate of Income-tax (Section 155)Rebate works on tax already computed, so study it only after total income and deductions are clear.
- 5Rebate for Certain Individuals (Section 156)It is a related rebate with its own conditions, so read it right after the main rebate to compare the two.
- 6Relief for Income Taxed Abroad and Other ReliefsRelief is the last reduction applied to tax, so it comes after rebate in both study and computation.
- 7Impermissible Avoidance Arrangement (Section 181)This is a theory topic that stands apart from the computation flow, so finish it last and revise it as short points.
How to prepare Deductions, Rebate and Relief
Treat this chapter as a sequence of stages, not a list of sections. Build the sequence first, then fill in conditions and limits.
- Draw the flow once: Gross Total Income, less deductions, equals total income, tax computed, less rebate, less relief, then tax payable.
- Make a one-page table for deductions with the payment or income covered, who can claim, the limit and the key condition. Learn it from the official Act text.
- Note which deductions depend on the tax regime in the question, and read the question for that choice before computing.
- Practise full computation questions where you start from Gross Total Income, and write each stage on a separate line to earn step marks.
- Compare the two rebates side by side, noting the eligible person, the income limit and what the rebate cannot exceed.
- Write short answers for the anti-avoidance topic: meaning, how an arrangement becomes impermissible, and the consequences. Rehearse them aloud.
- Solve MCQs under time pressure, since the 2-mark questions often test a single limit or condition and have no negative marking.
Common mistakes in Deductions, Rebate and Relief
Subtracting rebate or relief from income instead of from tax.
Fix: Write the flow at the top of your answer and place deductions before tax, rebate and relief after tax.
Ignoring the limit or overall ceiling on deductions.
Fix: Keep a limits table and check it against the Act text before every claim.
Claiming deductions that the chosen tax regime does not allow.
Fix: Underline the regime instruction first and list the allowed deductions under it.
Applying rebate when the income limit or residential condition is not met.
Fix: Test each condition in order: person, residence, total income limit, then compute the rebate.
Using old terms such as assessment year or the 1961 Act section numbers.
Fix: Study only from the Income-tax Act, 2025 and use tax year and the new section numbers.
Skipping the anti-avoidance topic as too theoretical.
Fix: Prepare a short structured answer covering meaning, test and consequences; it is quick to learn and easy to score.
Last-day revision: Deductions, Rebate and Relief
- Order of computation: Gross Total Income, deductions, total income, tax, rebate, relief, tax payable.
- Deductions reduce income; rebate and relief reduce tax. Never mix the stages.
- A deduction is generally limited to the amount actually eligible and cannot exceed the income it relates to where the Act says so.
- Check the regime in the question before claiming any deduction.
- Rebate under Section 155 is for eligible resident individuals whose total income is within the limit in the Act.
- Rebate cannot exceed the tax payable on total income.
- Section 156 gives a separate rebate to certain individuals; check its own conditions.
- Relief for foreign tax depends on the same income being taxed in India and abroad.
- Section 181 deals with impermissible avoidance arrangements; learn the meaning and consequences.
- Use Income-tax Act, 2025 terms: tax year, not assessment year.
- Show each stage on its own line in written answers.
- Read the question for residential status and taxpayer type before applying a deduction.
Deductions, Rebate and Relief practice questions
- Meera Iyer is a resident individual whose total income for the tax year is Rs 4,80,000. Her income-tax computed before any deduction under t…
- Under section 122(5) of the Income-tax Act, 2025, deduction under Part C of Chapter VIII is NOT allowed to an assessee who fails to do which…
- Arjun Nair, a resident individual, has total income of Rs 5,10,000 and income-tax before any deduction of Rs 22,500 (ignore cess). He is not…
- Ravi Menon, a resident individual, has gross total income of Rs. 6,00,000 under the Income-tax Act, 2025. He claims Chapter deductions of Rs…
- Meera, a resident individual, has a total income of Rs. 4,80,000 for the tax year. Income-tax computed on it before any rebate is Rs. 10,000…
- Arun, a resident individual, has total income of Rs. 12,00,000, chargeable to tax under section 202(1), and income-tax on it before rebate i…
- Sunita, a resident individual, has total income of Rs. 5,00,001, taxed under the regime that offers only the section 156(1) rebate, with inc…
- Kavita Rao, a resident individual, has total income of Rs 11,80,000 chargeable to tax under section 202(1) of the Income-tax Act, 2025. Her …
Deductions, Rebate and Relief in other exams
The same ground in other exams, if you are preparing for more than one or want another angle on it.
Deductions, Rebate and Relief: frequently asked questions
Are deductions subtracted from income or from tax?
Deductions are subtracted from Gross Total Income to reach total income. Rebate and relief are subtracted from the tax computed. Keep these stages separate in every answer.
Is this chapter more theory or numerical?
Mostly numerical and conditions-based, with Section 181 as the main theory topic. You need both the rules and the ability to apply them in a computation.
Which Act should I use for this chapter?
Use the Income-tax Act, 2025 and the tax year 2026-27. Use its section numbers and terms, not those of the 1961 Act.
How should I attempt MCQs from this chapter?
Identify the stage being tested, then check the single condition or limit involved. There is no negative marking, so attempt every question.