Article 28 – Case Scenarios

Illustration 1:

Mr. A has a business income of 20,00,000 (AED). Mr A takes a loan of Rs 15,00,000 from Bank. Out of which he used 5,00,000(AED) for working Capital in His business and the rest 10,00,000(AED) to Purchase house for his personal residence. The rate of Interest is 5%. Calculate the Income of Mr. A.

Solution :

As per Clause 1 of Article 28, Any expenditure that is incurred in connection with taxable person business is eligible for deduction.

Therefore, Interest amounting 50,000(AED) (10,00,000*5%) is not allowed as it was not incurred in connection with Taxable Person’s Business. Interest amounting to 25,000(AED) (5,00,000*5%) is allowed.

However , Total Income : (20,00,000+5,00,000) – 25,000 = 24,75,000(AED)