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

Sundaram Traders, a resident firm, has gross total income of Rs. 6,00,000 for the tax year. It is eligible for deductions under Chapter VIII (Part C and other provisions) aggregating Rs. 7,50,000 on a standalone basis. Under section 122 of the Income-tax Act, 2025, what is the maximum aggregate deduction allowable under this Chapter?

The maximum aggregate deduction is Rs. 6,00,000, because section 122(2) says total deductions under the Chapter cannot exceed the gross total income. The claim of Rs. 7,50,000 is restricted to the GTI, leaving total income at nil.

  1. ARs. 7,50,000
  2. BRs. 6,00,000Correct
  3. CRs. 1,50,000
  4. DRs. 13,50,000

Explanation

Section 122(2) provides that the aggregate deductions under this Chapter cannot exceed the gross total income. The GTI is Rs. 6,00,000, so the deductions are capped at that amount and total income becomes nil. Option A ignores the cap; option C is just the excess.

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