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CS Executive · Tax Laws and Practice · Income from Other Sources

Ravi Textiles Ltd, a domestic company, holds listed debentures and receives interest of Rs. 4,00,000 for the tax year. It paid a bank Rs. 6,000, a reasonable commission for realising this interest. Under the Income-tax Act, 2025 as amended w.e.f. 1-4-2026, what is the treatment of the commission under 'Income from other sources'?

The Rs. 6,000 commission is deductible. The Act allows any reasonable commission or remuneration paid to a banker or another person for realising interest on securities on behalf of the assessee, so the income from other sources is reduced by that amount.

  1. ANot deductible because commission is a personal expense
  2. BDeductible, as a reasonable sum paid to a banker for realising interest on securitiesCorrect
  3. CDeductible only up to 20% of the interest income
  4. DDeductible only if the commission is paid outside India

Explanation

Section 93(1)(a) allows any reasonable sum paid as commission or remuneration to a banker or other person for realising interest on securities. The 20% cap relates to the earlier dividend interest-expense rule, which no longer applies. Commission for realising interest is not a personal expense.

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