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CMA Final · Direct Tax Laws and International Taxation · Interest and Fees

A non-resident (not a company) has gross total income of Rs 12,00,000, including Rs 5,00,000 of dividend under section 207(1) serial 1 and Rs 7,00,000 of other income. Eligible Chapter VIII deductions, if computed on the reduced gross total income, would be limited to the lower of the amount claimed (Rs 9,00,000) and that reduced gross total income. What deduction is allowed under section 207(6)(b)?

The deduction allowed is Rs 7,00,000. Section 207(6)(b) reduces gross total income by the Rs 5,00,000 dividend, leaving Rs 7,00,000, and Chapter VIII deductions are allowed as if that were the gross total income, so the Rs 9,00,000 claim is restricted to that amount.

  1. ARs 7,00,000Correct
  2. BRs 9,00,000
  3. CRs 5,00,000
  4. DRs 12,00,000

Explanation

Section 207(6)(b) reduces gross total income by the serial 1 to 7 income: Rs 12,00,000 minus Rs 5,00,000 equals Rs 7,00,000. Deduction is allowed as if this reduced amount were gross total income, so it is capped at Rs 7,00,000 even though Rs 9,00,000 is claimed. Allowing Rs 9,00,000 or Rs 12,00,000 ignores the reduction.

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