CS Professional · Advanced Direct Tax Laws and Practice · Income Tax Implication on Specified Transactions
Under the Income-tax Act, 2025, Kiran Ltd must deduct tax under Chapter XIX-B on a sum payable to a person located in a notified jurisdictional area. The rate in force is 10% and the rate specified in the relevant provision is 20%. At what rate must tax be deducted?
Tax must be deducted at 30%. For payees located in a notified jurisdictional area, the rate is the highest of the rate in force, the rate in the relevant provision, and 30%. Among 10%, 20% and 30%, the highest is 30%.
- A30%Correct
- B20%
- C10%
- D15%, being the average of the three rates
Explanation
Section 176(5) requires deduction at the highest of three rates: the rate in force, the rate in the relevant provision, and 30%. Here these are 10%, 20% and 30%, so the highest is 30%. Choosing 20% ignores the 30% floor in clause (c).
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