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

Rohit, a non-resident Indian, has the following income for the tax year: investment income Rs. 5,00,000, long-term capital gains Rs. 3,00,000 and business income Rs. 4,00,000 from India. He has eligible deductions under the Chapter of Rs. 6,00,000, which are otherwise available on a gross total income basis. Applying section 213(2) of the Income-tax Act, 2025 read with the overall limit in section 122(2), what is the maximum deduction allowable?

The maximum deduction is Rs. 4,00,000. Section 213(2) reduces Rohit's gross total income of Rs. 12,00,000 by investment income and long-term capital gains of Rs. 8,00,000, leaving Rs. 4,00,000, and deductions cannot exceed this adjusted gross total income.

  1. ARs. 6,00,000
  2. BRs. 4,00,000Correct
  3. CRs. 8,00,000
  4. DRs. 0

Explanation

Under section 213(2)(b), gross total income is reduced by investment income and long-term capital gains (Rs. 8,00,000) from Rs. 12,00,000, leaving Rs. 4,00,000. Deductions are then allowed as if this were the gross total income, so they are capped at Rs. 4,00,000 under section 122(2). Rs. 6,00,000 ignores the reduction; Rs. 0 applies only if the gross total income consists solely of such income.

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