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CA Final · Direct Tax Laws & International Taxation · Income of Other Persons included in Assessee's Total Income

The total income of an assessee, computed as per the Income-tax Act, 2025, is ₹12,50,000. It includes ₹2,50,000 of income on which no income-tax is payable. Income-tax chargeable on the total income of ₹12,50,000 is ₹1,00,000. What deduction from income-tax is the assessee entitled to in respect of the income on which no tax is payable?

The deduction is ₹20,000. Section 190 allows relief at the average rate of tax on the income on which no tax is payable. The average rate is 1,00,000 divided by 12,50,000, which is 8%, and 8% of ₹2,50,000 is ₹20,000.

  1. A₹25,000
  2. B₹20,000Correct
  3. C₹1,00,000
  4. D₹80,000

Explanation

Section 190 gives a deduction equal to tax at the average rate on the income on which no tax is payable. Average rate = 1,00,000 / 12,50,000 = 8%. Deduction = 8% × 2,50,000 = ₹20,000. ₹25,000 wrongly uses a 10% rate, and ₹80,000 is the tax left after the deduction, not the deduction.

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