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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Nature of Business

An IFSC unit of Bharat Finserve Ltd earns Rs 80 lakh of income of the nature referred to in section 147(3) and Rs 20 lakh of other income, so its total income is Rs 100 lakh. Section 218 charges the section 147(3) income at 15% and the balance at rates in force. Assuming the rates in force are 25% for the balance, what is the tax before surcharge and cess?

The tax is Rs 17 lakh. Income of Rs 80 lakh at 15% gives Rs 12 lakh, and the remaining Rs 20 lakh at the assumed rate of 25% gives Rs 5 lakh. Section 218 taxes the two portions at separate rates.

  1. ARs 17 lakhCorrect
  2. BRs 12 lakh
  3. CRs 25 lakh
  4. DRs 15 lakh

Explanation

Tax on Rs 80 lakh at 15% is Rs 12 lakh. Tax on the balance Rs 20 lakh at 25% is Rs 5 lakh. The total is Rs 17 lakh. Rs 12 lakh ignores the other income, and Rs 25 lakh applies 25% to the whole amount.

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