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CS Executive · Tax Laws and Practice · Deductions

Under the Income-tax Act, 2025 (applicable from the June 2027 session), how do the deductions allowed under the section dealing with rebate (section 155 read with section 156) operate in computing tax?

The deductions under section 155 read with section 156 are allowed from the income-tax computed on the total income, before those deductions are given. They reduce the tax payable rather than the total income, so they are not subtracted before applying the rates.

  1. AThey are subtracted from the total income before applying the tax rates
  2. BThey are allowed from the income-tax computed on the total income, before allowing the deductions under that PartCorrect
  3. CThey are added back to the total income as a notional income
  4. DThey are allowed only against income from house property

Explanation

Section 155(1) provides that the deductions specified in section 156 are allowed from income-tax as computed before allowing the deductions under that Part. They are therefore a reduction of tax, not of total income. The option about subtracting from total income confuses this with a deduction from income.

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