CAF-2 · Chapter 11 · Question 7 of 15
Mr. Z, an individual, makes a donation via crossed cheque to an approved non-profit organization which is an *associate* of Mr. Z. His taxable income is Rs. 2,000,000, and his actual donation was Rs. 500,000. What is the maximum eligible amount (Component C) to be used in the formula (A/B x C) for calculating his tax credit?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) C) Rs. 300,000
Explanation
Component C is the lesser of the actual donation or a percentage of taxable income. Normally it is 30% for individuals, but where the donation is given to an *associate*, the limit is restricted to 15% of taxable income (15% of 2,000,000 = Rs. 300,000).
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