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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Business Restructuring

Under the Income-tax Act, 2025, which of the following is allowed as a deduction under the 'other deductions' provision (section 32) in computing business income?

Bonus or commission paid to an employee for services rendered is deductible, provided the amount would not have been payable to the employee as profits or dividend. CSR spending, compounding of offences and political party souvenir advertisements are specifically excluded from allowable business expenditure.

  1. AExpenditure incurred on corporate social responsibility activities under section 135 of the Companies Act, 2013
  2. BBonus or commission paid to an employee for services rendered, where the amount would not have been payable to the employee as profits or dividend had it not been paid as bonus or commissionCorrect
  3. CExpenditure incurred to compound an offence under a law in force in India
  4. DAdvertisement expenditure in a souvenir published by a political party

Explanation

Section 32(a) expressly allows bonus or commission paid to an employee for services rendered, provided it would not otherwise have been payable as profits or dividend. The other three items are excluded from wholly-and-exclusively expenditure under section 34(2) and (3): CSR spend, compounding of offences and political party advertisements.

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