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CA Intermediate · Taxation · Deductions from Gross Total Income

Anita, a resident individual under the regime allowing deductions, has gross total income of ₹5,00,000, all of it taxable at normal rates with no capital gains. She paid life insurance premium of ₹1,50,000 (fully eligible for deduction) and donated ₹60,000 by cheque to an approved charitable trust, a donation eligible for 50% deduction subject to the 10%-of-adjusted-total-income ceiling. What is her deduction for the donation?

The deduction is ₹17,500. Adjusted total income is ₹3,50,000 after the ₹1,50,000 premium deduction, so the qualifying donation is capped at 10%, or ₹35,000. Only 50% of this qualifying amount is deductible, giving ₹17,500.

  1. A₹17,500Correct
  2. B₹30,000
  3. C₹25,000
  4. D₹35,000

Explanation

Adjusted total income = 5,00,000 − 1,50,000 (other deductions) = ₹3,50,000. The 10% ceiling is ₹35,000, lower than the donation of ₹60,000, so the qualifying amount is ₹35,000. Deduction is 50% of it = ₹17,500. ₹30,000 ignores the ceiling, ₹25,000 computes the ceiling on gross total income, and ₹35,000 omits the 50% rate.

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