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CS Executive · Tax Laws and Practice · Profits and Gains from Business and Profession

A company withdrew ₹5,00,000 from its site restoration account during a tax year for business purposes under the deposit scheme, but utilised only ₹3,00,000 for those purposes within that tax year. What is the tax consequence under Schedule X of the Income-tax Act, 2025?

₹2,00,000 is deemed business profit. When an amount withdrawn for scheme purposes is not utilised, wholly or partly, within the same tax year, the unutilised part is treated as profits and gains of business of that year. The utilised ₹3,00,000 is not taxed under this rule.

  1. A₹2,00,000 is deemed to be business profits of that tax yearCorrect
  2. B₹3,00,000 is deemed to be business profits of that tax year
  3. C₹5,00,000 is deemed to be business profits of that tax year
  4. DNo amount is taxable because the withdrawal was for business purposes

Explanation

Paragraph 3(5) deems the amount withdrawn but not utilised for the scheme's purposes within the tax year to be business profits of that year. Unutilised amount is ₹5,00,000 − ₹3,00,000 = ₹2,00,000. The utilised portion is not taxed under this provision.

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