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

Gangotri Chemicals Ltd has an adjusted gross total income of Rs. 50,00,000. In the tax year it paid by cheque: Rs. 4,00,000 to the National Defence Fund, Rs. 3,00,000 to an approved charitable fund under section 133(1)(b)(ii), and Rs. 4,00,000 to an authority for city housing under section 133(1)(b)(iv). What is the total deduction under section 133?

The total deduction is Rs. 6,50,000. The National Defence Fund donation of Rs. 4,00,000 is allowed in full. The other donations of Rs. 7,00,000 are capped at 10% of adjusted gross total income, Rs. 5,00,000, and 50% of that, Rs. 2,50,000, is allowed.

  1. ARs. 4,00,000 + Rs. 3,50,000 = Rs. 7,50,000
  2. BRs. 4,00,000 + Rs. 2,50,000 = Rs. 6,50,000Correct
  3. CRs. 9,00,000
  4. DRs. 5,50,000

Explanation

The National Defence Fund gift of 4,00,000 is fully allowed and outside the ceiling. The two 50% donations total 7,00,000, which exceeds 10% of 50,00,000 = 5,00,000, so only 5,00,000 counts. 50% of 5,00,000 = 2,50,000. Total is 4,00,000 + 2,50,000 = 6,50,000. The first option ignores the ceiling.

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