CS Executive · Tax Laws and Practice · Classification and Tax Incidence on Companies
Sagar Textiles Ltd, an Indian company, paid Rs. 5,00,000 by bank transfer to a political party registered under section 29A of the Representation of the People Act, 1951, and Rs. 1,00,000 in cash to another registered party in the same tax year. Under section 136 of the Income-tax Act, 2025, the deduction allowed is:
The deduction is Rs. 5,00,000. Section 136 of the Income-tax Act, 2025 allows an Indian company a deduction only for contributions made other than by cash to a registered party or electoral trust, so the Rs. 1,00,000 cash payment is disallowed.
- ARs. 5,00,000Correct
- BRs. 6,00,000
- CRs. 1,00,000
- DNil
Explanation
Only the non-cash contribution of Rs. 5,00,000 qualifies because the recipient is a registered party. The Rs. 1,00,000 cash contribution is excluded, so total Rs. 6,00,000 is wrong. Allowing only the cash amount reverses the rule.
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