Deductions to be made in computing total income
[Section-122 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 122(1) of Income Tax Act 2025
122(1) In computing the total income of an assessee, the deductions specified in this Chapter shall be allowed from his gross total income, as per and subject to the provisions of this Chapter.
Section 122(2) of Income Tax Act 2025
122(2) The aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee.
Section 122(3) of Income Tax Act 2025
122(3) If the deduction under section 133 or 135 or 137 or 138 or 141 or 142 or 143 is admissible in computing the total income of an association of persons or a body of individuals, no deduction under the same provision shall be made in relation to the share of income of a member of such association of persons or body of individuals while computing the total income of such member.
Section 122(4) of Income Tax Act 2025
122(4) Irrespective of anything to the contrary contained in any of the provisions of this Chapter under the heading “Deductions in respect of certain incomes”, where, in the case of an assessee, any amount of profits and gains of an undertaking or unit or enterprise or eligible business is claimed and allowed as a deduction under those provisions for any tax year,––
- (a) deduction in respect of, and to the extent of, such profits and gains shall not be allowed under any other provision of this Act for such tax year; and
- (b) shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible business.
Section 122(5) of Income Tax Act 2025
122(5) Deduction under the provisions of Part C of this Chapter shall not be allowed to an assessee, who fails to—
- (a) furnish a return of income on or before the due date specified under section 263(1); or
- (b) make a claim of deduction in return furnished under section 263(1).
Section 122(6) of Income Tax Act 2025
122(6) For the purposes of any deduction under this Chapter, irrespective of anything to the contrary contained in Part C of this Chapter, if any goods or services held for the purposes of––
- (a) the undertaking, unit, enterprise or eligible business carried on by the assessee are transferred to any other business carried on by the assessee; or
- (b) any other business carried on by the assessee are transferred to the undertaking or unit or enterprise or eligible business of the assessee; and
- (c) the consideration, if any, for such transfer as recorded in the accounts of the undertaking or unit or enterprise or eligible business does not correspond to the market value of such goods or services as on the date of transfer,
the profits and gains of such undertaking or unit or enterprise or eligible business carried on by the assessee, shall be computed as if the transfer in clause (a) or (b), had been made at the market value of such goods or services as on that date.
Section 122(7) of Income Tax Act 2025
122(7) For the purposes of sub-section (6), “market value”,—
- (a) in relation to any goods or services sold or supplied, means the price that such goods or services would fetch, if these were sold by the undertaking or unit or enterprise or eligible business in the open market, subject to statutory or regulatory restrictions, if any;
- (b) in relation to any goods or services acquired, means the price that such goods or services would cost if these were acquired by the undertaking or unit or enterprise or eligible business from the open market, subject to statutory or regulatory restrictions, if any; and
- (c) in relation to any goods or services sold, supplied or acquired means the arms length price of such goods or services as defined in section 173(a), if it is a specified domestic transaction referred to in section 164.
Section 122(8) of Income Tax Act 2025
122(8) Where a deduction under Part C of this Chapter, is claimed and allowed in respect of profits of a specified business as referred to in section 46(11)(d) for any tax year, no deduction shall be allowed for such specified business under section 46 for the same or any other tax year.
Section 122(9) of Income Tax Act 2025
122(9) Where any deduction is required to be made or allowed under Part C of this Chapter, in respect of any income of the nature specified in that section and included in the gross total income of the assessee, then, irrespective of anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed under the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income.
Section 122(10) of Income Tax Act 2025
122(10) In this Chapter, “gross total income” means the total income computed as per the provisions of this Act, before making deduction under this Chapter.
FAQs on Section 122 of Income Tax Act 2025
What does Section 122(1) state about deductions from gross total income?
Section 122(1) provides that deductions specified in this Chapter shall be allowed from the gross total income, subject to the provisions of the Chapter.
Is there a limit to the total amount of deductions under this Chapter?
Yes, as per Section 122(2), the aggregate amount of deductions cannot exceed the gross total income of the assessee.
Can a member of an AOP or BOI claim the same deduction already allowed to the AOP or BOI?
No, under Section 122(3), if a deduction is allowed to an AOP or BOI, no corresponding deduction shall be allowed to a member in respect of their share of such income.
Can profits and gains be deducted under multiple provisions simultaneously?
No, as per Section 122(4), once profits and gains of an undertaking or unit or eligible business are deducted under certain provisions, they cannot be deducted under any other provision for the same tax year.
What is the maximum deduction allowed for an eligible business under Section 122(4)?
The deduction shall in no case exceed the actual profits and gains of the eligible business for that tax year.
Can an assessee claim deduction if they fail to file the return on time?
No, as per Section 122(5), no deduction under Part C is allowed if the assessee fails to file the return by the due date or fails to claim the deduction in the return.
What happens if goods or services are transferred between businesses of the same assessee at a value not reflecting market price?
Under Section 122(6), the profit of the undertaking or unit shall be recomputed as if the transfer was made at market value.
How is ‘market value’ defined for goods and services in intra-business transfers?
Section 122(7) defines market value based on open market price or arm’s length price, depending on the nature of the transaction.
What if the transfer between businesses is a specified domestic transaction?
If it is a specified domestic transaction, the market value is taken as the arm’s length price as per section 173(a) read with section 164.
Can a specified business claim deduction under section 46 after already claiming under Part C?
No, as per Section 122(8), once deduction is claimed and allowed under Part C for a specified business, no further deduction is allowed under section 46 for the same or any other tax year.
What income amount is used to compute deductions under Part C?
As per Section 122(9), only the amount of income computed under the Act before making any deduction is deemed to be the income eligible for deduction.
How is ‘gross total income’ defined under this Chapter?
Section 122(10) defines “gross total income” as total income computed before allowing deductions under this Chapter.
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