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CMA Intermediate · Direct and Indirect Taxation · Income from Other Sources

Mr. Dinesh Gupta holds government securities and pays Rs. 3,000 as reasonable commission to his banker for realising the interest on them. Which statement about the deduction under section 93 is correct?

The commission is deductible. Section 93(1)(a) allows any reasonable sum paid as commission or remuneration to a banker or another person for realising interest on securities on the assessee's behalf. The amended clause now covers interest only, not dividends.

  1. ANo deduction is allowed as interest on securities is exempt from commission claims
  2. BThe commission is deductible as a reasonable sum paid to a banker for realising such interestCorrect
  3. COnly 20% of the interest income can be deducted as commission
  4. DThe commission is deductible only if it is capital expenditure

Explanation

Section 93(1)(a), as substituted w.e.f. 1 April 2026, allows any reasonable sum paid as commission or remuneration to a banker or other person for realising interest on securities on behalf of the assessee. The 20% limit relates to interest expense on dividend under the old rules and is not relevant. Capital expenditure is not deductible under clause (e).

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