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CS Executive · Tax Laws and Practice · Basic Concept of Income Tax

Section 155(2) of the Income-tax Act, 2025 places which limit on the rebate allowed under section 156?

The rebate cannot exceed the income-tax computed before the deductions on the assessee's total income. Section 155(2) says so, which means the rebate can at most reduce tax to nil and never produces a refund or negative tax.

  1. AIt cannot exceed the income-tax computed before allowing the deductions under that Part on the assessee's total incomeCorrect
  2. BIt cannot exceed 10% of the total income
  3. CIt is allowed only against tax on capital gains
  4. DIt can exceed the tax and the excess is refunded

Explanation

Section 155(2) states that the deduction under section 156 shall not in any case exceed the income-tax, as computed before allowing the deductions under that Part, on the total income. A rebate is therefore never refundable and cannot create a negative tax. The other options have no basis in the text.

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