CS Executive · Tax Laws and Practice · Profits and Gains from Business and Profession
Under Schedule X of the Income-tax Act, 2025, Bharat Petro Ltd has business profits of Rs 80 lakh before any deduction under this Schedule. It deposited Rs 25 lakh in the specified account by the end of the tax year and satisfies all conditions. What deduction is allowed?
The deduction is Rs 16 lakh. Schedule X allows the lower of the amount deposited, Rs 25 lakh, and 20% of business profits before the deduction, which is Rs 16 lakh. The profit-based cap is therefore the binding limit.
- ARs 25 lakh
- BRs 16 lakhCorrect
- CRs 20 lakh
- DRs 9 lakh
Explanation
The deduction is the lesser of the amount deposited (Rs 25 lakh) and 20% of profits before this deduction (20% x 80 lakh = Rs 16 lakh). The lower figure is Rs 16 lakh. Rs 25 lakh ignores the profit ceiling.
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