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CS Executive · Tax Laws and Practice · Profits and Gains from Business and Profession

Under the site restoration fund provisions of the Income-tax Act, 2025 (Schedule X), an assessee in petroleum extraction deposits Rs 30 lakh in the specified account during the tax year. Profits of the business before this deduction are Rs 100 lakh. What deduction is allowed for the tax year?

The deduction is Rs 20 lakh. Schedule X allows the lesser of the amount deposited, Rs 30 lakh, and 20% of business profits before the deduction, which is Rs 20 lakh. The percentage cap is therefore the binding limit in this case.

  1. ARs 30 lakh
  2. BRs 20 lakhCorrect
  3. CRs 10 lakh
  4. DRs 50 lakh

Explanation

The deduction is the lower of the amount deposited (Rs 30 lakh) and 20% of profits computed before this deduction (20% of Rs 100 lakh = Rs 20 lakh). The lower figure is Rs 20 lakh. Allowing the full deposit of Rs 30 lakh ignores the 20% cap.

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