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CMA Final · Direct Tax Laws and International Taxation · Assessment of Companies

Zenith Ltd, an Indian company, contributed Rs 8,00,000 during the tax year 2026-27 to an electoral trust. Rs 5,00,000 was paid by bank transfer and Rs 3,00,000 was paid in cash. Under section 136 of the Income-tax Act, 2025, what deduction is allowable for this contribution?

The allowable deduction is Rs 5,00,000. Section 136 permits an Indian company to deduct contributions to a registered political party or electoral trust only if made other than in cash, so the Rs 3,00,000 cash payment is disallowed.

  1. ARs 8,00,000
  2. BRs 5,00,000Correct
  3. CRs 3,00,000
  4. DNil, as electoral trusts are not covered

Explanation

Section 136(1) allows an Indian company a deduction for contributions made other than by way of cash to a registered political party or an electoral trust. Only the bank-transferred Rs 5,00,000 qualifies. Rs 8,00,000 wrongly includes the cash portion, and electoral trusts are expressly covered.

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