IAI Actuarial Core Principles · Business Finance · Personal and corporate taxation
Sundaram Ltd reports accounting profit before tax of ₹80 lakh. This includes ₹12 lakh of accounting depreciation, ₹3 lakh of fines for breach of law (not tax deductible) and ₹5 lakh of dividend income that is exempt. Tax-allowable depreciation is ₹18 lakh. What is its taxable profit?
Taxable profit is ₹72 lakh. Add back accounting depreciation of 12 and non-deductible fines of 3 to the 80 lakh profit, then deduct the exempt dividend of 5 and the tax-allowable depreciation of 18, giving 72 lakh.
- A₹72 lakhCorrect
- B₹60 lakh
- C₹66 lakh
- D₹75 lakh
- ₹78 lakh
Explanation
Start with 80. Add back depreciation 12 and fines 3 to get 95. Deduct exempt dividend 5 and allowable depreciation 18, giving 95 - 23 = 72 lakh. Option 60 deducts the 12 and 18 depreciation both without adding back; 66 is from missing the fines and dividend sign errors.
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