For the previous year 2021-22, the business income of X Ltd. before allowing expenditure on family planning is Rs.3,00,000. The company had incurred the following expenditure on family planning amongst its employees during the previous year 2021-22:
(i) Revenue expenses on family planning Rs 1, 65,000.
(ii) Capital expenditure on family planning Rs 9, 00,000.
a) Compute the deduction available for expenditure on family planning to the company assuming the company has income from other sources amounting to Rs. 30,000.
b) What will be your answer if the revenue expenditure on family planning is Rs. 2, 30,000 instead of Rs.1, 65,000?
Ans – Deduction for Expenditure on Family Planning: An Analysis
The Income Tax Act in India provides deductions for certain types of expenditures, including those related to family planning. Let's calculate the deduction available for expenditure on family planning to X Ltd. based on the provided information.
Given Information:
- Business income before expenditure on family planning: Rs. 3,00,000
- Revenue expenses on family planning: Rs. 1,65,000
- Capital expenditure on family planning: Rs. 9,00,000
- Income from other sources: Rs. 30,000
a) Calculation of Deduction for Expenditure on Family Planning:
The deduction for expenditure on family planning is calculated as follows:
Deduction = Lesser of (Income from Other Sources) and (Expenditure on Family Planning)
Calculation: Deduction = Lesser of (Rs. 30,000) and (Rs. 1,65,000 + Rs. 9,00,000) Deduction = Lesser of Rs. 30,000 and Rs. 10,65,000 Deduction = Rs. 30,000
Therefore, the deduction available for expenditure on family planning to X Ltd. is Rs. 30,000.
b) Calculation with Different Revenue Expenditure:
Given new information:
- Revenue expenses on family planning: Rs. 2,30,000
Calculation: Deduction = Lesser of (Rs. 30,000) and (Rs. 2,30,000 + Rs. 9,00,000) Deduction = Lesser of Rs. 30,000 and Rs. 11,30,000 Deduction = Rs. 30,000
Even with the change in revenue expenditure, the deduction available for expenditure on family planning to X Ltd. remains Rs. 30,000.
Note: The deduction is limited to the lesser of the income from other sources and the total expenditure on family planning. The capital expenditure on family planning does not have any impact on the deduction amount, as it is not considered for this purpose.
In conclusion, the deduction available for expenditure on family planning to X Ltd. is determined by comparing the income from other sources to the total expenditure on family planning. The deduction is capped at the lesser of the two amounts, and the capital expenditure on family planning is not relevant for this calculation.
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