CAF-2 · Chapter 7 · Question 9 of 15
In tax year 2025, an entity claimed a bad debt of Rs. 100,000, but the Commissioner allowed only Rs. 75,000 as a deduction. In tax year 2026, the entity recovered Rs. 90,000 from that specific debtor. What amount will be treated as business income for tax year 2026?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) B) Rs. 65,000
Explanation
The formula is (a - b), where 'a' is the amount received (Rs. 90,000) and 'b' is the difference between the whole bad debt and the amount allowed (100,000 - 75,000 = 25,000). Since 90,000 is greater than 25,000, the difference (90,000 - 25,000 = Rs. 65,000) is treated as income.
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