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CA Final · Direct Tax Laws & International Taxation · Deductions from Gross Total Income

Mr. Raghav Iyer, a resident individual, has gross total income of Rs. 3,20,000 for the tax year, comprising salary of Rs. 2,00,000 and interest on bank deposits of Rs. 1,20,000. He has made eligible investments and payments that would, under various sections of Chapter VIII, qualify for aggregate deductions of Rs. 4,10,000. Based on section 122 of the Income-tax Act, 2025, what is the maximum aggregate deduction allowable under the Chapter and his resulting total income?

The deduction is limited to Rs. 3,20,000 and total income is nil. Section 122(2) says aggregate Chapter deductions can never exceed gross total income, so the excess Rs. 90,000 is simply lost and no negative income or carry forward arises.

  1. ADeduction Rs. 4,10,000; total income negative Rs. 90,000 to be carried forward
  2. BDeduction Rs. 3,20,000; total income Rs. 0Correct
  3. CDeduction Rs. 2,00,000; total income Rs. 1,20,000
  4. DDeduction Rs. 1,20,000; total income Rs. 2,00,000

Explanation

Section 122(2) provides that the aggregate deductions under the Chapter cannot exceed the gross total income. Eligible deductions are Rs. 4,10,000 but GTI is Rs. 3,20,000, so deduction is capped at Rs. 3,20,000 and total income is nil. A negative total income cannot arise from these deductions, and they cannot be carried forward.

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