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CA Final · Direct Tax Laws & International Taxation · Deductions from Gross Total Income

Anil Menon, a non-resident Indian, has gross total income of Rs. 9,00,000 for the tax year: business income from India of Rs. 4,00,000, and investment income plus long-term capital gains (as covered by section 213) of Rs. 5,00,000. He is entitled to Chapter VIII deductions of Rs. 4,50,000 in total. Applying section 213(2)(b) and section 122(2), what is his total income?

Total income is Rs. 5,00,000. The investment income and LTCG of Rs. 5,00,000 are excluded when computing the deduction base, leaving Rs. 4,00,000, so the claim of Rs. 4,50,000 is capped at Rs. 4,00,000. Rs. 9,00,000 less Rs. 4,00,000 gives Rs. 5,00,000.

  1. ARs. 4,50,000
  2. BRs. 5,00,000Correct
  3. CRs. 9,00,000
  4. DRs. 4,00,000

Explanation

Under section 213(2)(b), GTI is reduced by the investment income and LTCG (Rs. 5,00,000), leaving Rs. 4,00,000 as the base for deductions. Deductions of Rs. 4,50,000 are capped at Rs. 4,00,000 under section 122(2). Total income = Rs. 9,00,000 - Rs. 4,00,000 = Rs. 5,00,000. Option A wrongly allows the deduction against the full GTI of Rs. 9,00,000.

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