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CS Executive · Tax Laws and Practice · Classification and Tax Incidence on Companies

Bharat Textiles Ltd, an Indian company, made these tax-year payments: Rs. 2,00,000 by cheque to a registered political party, Rs. 1,00,000 by bank transfer to an electoral trust, and Rs. 40,000 in cash to a registered political party. Ignoring any other provision, what is the deduction available under section 136 of the Income-tax Act, 2025?

The deduction is Rs. 3,00,000. The cheque payment of Rs. 2,00,000 to a registered party and the Rs. 1,00,000 bank transfer to an electoral trust qualify under section 136, while the Rs. 40,000 cash contribution is not allowed.

  1. ARs. 3,40,000
  2. BRs. 3,00,000Correct
  3. CRs. 2,00,000
  4. DRs. 1,40,000

Explanation

Cheque and bank transfer payments are non-cash and go to a registered party and an electoral trust, so Rs. 2,00,000 + Rs. 1,00,000 = Rs. 3,00,000 qualify. The Rs. 40,000 cash payment is excluded, so Rs. 3,40,000 is wrong as it ignores the cash bar. Rs. 2,00,000 wrongly omits the electoral trust.

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