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CMA Final · Direct Tax Laws and International Taxation · Interest and Fees

Under section 207 of the Income-tax Act, 2025, a foreign company's gross total income is Rs 15,00,000, comprising Rs 6,00,000 of dividend taxable under section 207(1) (serial numbers 1 to 7) and Rs 9,00,000 of other income. For Chapter VIII deductions, how is the gross total income treated?

The deduction base is Rs 9,00,000. Section 207(6)(b) requires gross total income to be reduced by the special-rate income in serial numbers 1 to 7, here Rs 6,00,000 of dividend, and Chapter VIII deductions are allowed as if the remainder were the gross total income.

  1. AThe full Rs 15,00,000 is the base for deductions
  2. BThe base is Rs 9,00,000, after reducing the dividend incomeCorrect
  3. CNo Chapter VIII deduction is allowed at all
  4. DThe base is Rs 6,00,000, being the dividend income

Explanation

Section 207(6)(b) says that where GTI includes income of serial numbers 1 to 7, GTI is reduced by that income and Chapter VIII deductions are allowed as if the reduced amount were GTI. So the base is 15,00,000 - 6,00,000 = Rs 9,00,000. Complete disallowance applies only under (6)(a), when GTI consists only of such income.

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