CAF-2 · Chapter 6 · Question 7 of 15
Mr. Saad pays Rs. 150,000 annually to an agency for rent collection and administration of his plaza. His gross rent chargeable to tax for the year is Rs. 3,000,000. What is the maximum deduction he is allowed to claim for administration and collection charges?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) B) Rs. 120,000
Explanation
The deduction for administration and collection charges cannot exceed 4% of the rent chargeable to tax. Since the actual expense is Rs. 150,000, but 4% of Rs. 3,000,000 is Rs. 120,000, the deduction is restricted to the lower amount of Rs. 120,000.
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