Skip to content

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

Under the Income-tax Act, 2025 (applicable from the June 2027 session), a company claims a deduction for a contribution made to a registered political party. Which of the following contributions would qualify for deduction under section 136?

A non-cash payment, such as a bank transfer, by an Indian company to an electoral trust qualifies. Section 136 allows deduction only to Indian companies and only for contributions other than in cash, to a registered political party or an electoral trust.

  1. ARs. 50,000 paid in cash by an Indian company to a registered political party
  2. BRs. 50,000 paid by cheque by a foreign company to a registered political party
  3. CRs. 50,000 paid by bank transfer by an Indian company to an electoral trustCorrect
  4. DRs. 50,000 paid in cash by an Indian company to an electoral trust

Explanation

Section 136 allows a deduction to an assessee that is an Indian company for amounts contributed other than in cash to a registered political party or an electoral trust. A bank transfer by an Indian company to an electoral trust satisfies both the status and mode conditions. Cash payments fail the mode test, and a foreign company fails the Indian company test.

Did you get it right without looking?

One question tells you little. A timed set on Classification and Tax Incidence on Companies shows your real accuracy, how long you take and where you lose marks.

Practise Classification and Tax Incidence on CompaniesFree diagnostic mock

More Classification and Tax Incidence on Companies questions