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CS Executive · Tax Laws and Practice · Classification and Tax Incidence on Companies

Under Section 124 of the Income-tax Act, 2025, Mr. Arjun Sethi, a salaried individual, deposits Rs. 70,000 of his own money into his account under a notified pension scheme in the tax year, and also deposits Rs. 20,000 into the account of his minor daughter under the same scheme. Ignoring any employer contribution and Section 123, what is the maximum deduction available to him for these deposits?

The maximum deduction is Rs. 50,000. Section 124(3) gives up to Rs. 50,000 for the individual's own deposits, and sub-section (4) extends it to deposits for a minor child, but the combined deduction under both cannot exceed Rs. 50,000, despite total deposits of Rs. 90,000.

  1. ARs. 50,000Correct
  2. BRs. 70,000
  3. CRs. 90,000
  4. DRs. 20,000

Explanation

Sub-section (3) allows up to Rs. 50,000 for own deposits. Sub-section (4) allows deposits for a minor but the aggregate deduction under sub-sections (3) and (4) must not exceed Rs. 50,000. Total deposits of Rs. 90,000 are therefore capped at Rs. 50,000; Rs. 70,000 or Rs. 90,000 ignore the combined cap.

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