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CA Intermediate · Taxation · Profits and Gains of Business or Profession

Gupta Foods Ltd debited Rs 4,00,000 as bonus payable to employees in its profit and loss account for tax year 2026-27. It paid Rs 2,70,000 before the due date of filing its return for that year, Rs 80,000 after that due date but before the books were audited, and Rs 50,000 remained unpaid at the end of the year. How much of the bonus is disallowed in computing income for tax year 2026-27?

Rs 1,30,000 is disallowed. Bonus is deductible for the tax year only if paid on or before the due date of filing the return, so only Rs 2,70,000 qualifies. The Rs 80,000 paid late and Rs 50,000 unpaid together make the Rs 1,30,000 disallowance.

  1. ARs 1,30,000Correct
  2. BRs 80,000
  3. CRs 50,000
  4. DRs 4,00,000

Explanation

Bonus to employees is allowed in the year it is claimed only to the extent actually paid on or before the due date of filing the return for that year. Allowed amount is Rs 2,70,000. The balance 4,00,000 - 2,70,000 = Rs 1,30,000 (Rs 80,000 paid late plus Rs 50,000 unpaid) is disallowed. Rs 50,000 ignores the late payment, which does not qualify for that year.

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