CS Executive · Tax Laws and Practice · Deductions
Mr. Rao's income-tax on his total income, computed before allowing the deductions under the rebate Part, is Rs. 8,000. The deductions claimed under section 156 total Rs. 11,000. What is the maximum deduction allowed under section 155(2)?
The maximum deduction is Rs. 8,000. Under section 155(2), the deduction cannot exceed the income-tax computed on the total income before the deductions. Since the claim of Rs. 11,000 is above the tax of Rs. 8,000, it is restricted to Rs. 8,000.
- ARs. 11,000
- BRs. 3,000
- CRs. 8,000Correct
- DRs. 19,000
Explanation
Section 155(2) says the deduction under section 156 cannot exceed the income-tax computed before allowing the deductions. Tax is Rs. 8,000 and the claim is Rs. 11,000, so the allowance is capped at Rs. 8,000. Rs. 11,000 ignores the cap; Rs. 3,000 is the excess, wrongly treated as the allowed amount.
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