Sec 36 (1) (i)

Insurance Premium
Premium paid in respect of insurance against risk of damage or
destruction of stocks, stores used for the purpose of business or
profession

Sec 36 (1) (ia)

Insurance Premium paid by a federal milk co-op society
On the lives of cattle owned by the members

Sec 36 (1) (ib)

Insurance premium on health of employees
Insurance on health of his employees if it under an eligible
scheme by GIC or Other Insurer approved by IRDA

Sec 36 (1) (ii)

Bonus or commission to employees
Only if it is not payable as profit or dividend

Sec 36 (1) (iii)

Interest on borrowed capital
• The assessee must have borrowed money
• The Money so borrowed must have been used for the
purpose of business
• Interest is paid or payable on such borrowing

Sec 36 (1) (iiia)

Discount on zero coupon bonds
 Sec 36 (1) (va)
Employees contribution towards staff welfare schemes
Only if the contribution is remitted within the due date

Sec 36 (1) (vi)

Write off allowance for animals
Once the animals have died or become permanently useless

Sec 36 (1) (vi)

Bad debts
• There must be a debt
• Debt must be incidental to business or profession of the
assessee
• Debt must have been taken into account in computing
assessable income
• Debt must have been written off in the books of account
• Taxable upon recovery
• Bad debt of a discontinued business not admissible
• Bad debt allowable in the hands of successor in certain
cases
• Bad debt in the case of commercial banks

Sec 36 (1) (viia)

Provision for bad and doubtful debts relating to rural branches of
commercial banks
Limits 7.5% & 5% of the Total Income
And
 10% of advances made by rural branches

Sec 36 (1) (viii)

Transfer to special reserve
Who can claim? : Financial corporation/ public company
engaged in the business of providing long term finance is
eligible
Amount of deduction: Lower of
1. Amount transferred to special reserve
2. 20% of profits derived from this business
3. 200% of share capital+ reserves minus balance in special
reserve on the first day of the previous year
Other conditions:
• Amount withdrawn from the reserve is taxable

Sec 36 (1) (ix)

Family Planning Expenditure
• Bonafide expense by a company for promoting family
planning amojng its employees is allowable
• In case of capital expenditure one fifth allowed as
deduction for five years
• No deduction for non corporate assessee

Sec 36 (1) (xii)

Revenue expenditure incurred by entities established under any
Central, State, Provincial Act
• Institutions may not be carrying on business – as there is
no profit motive
• Their income is not exempt
• So this special provision

Sec 36 (1) (xiv)

Contribution to credit guarantee fund
• A Financial Institution can claim
• Contribution made to notified credit guarantee trust fund
for MSME

Sec 37 (2B)
Expenditure on Advertisement
In any souvenir, brochure, tract, pamphlet or the like
Published by a political party
Not allowed
No other restriction on expenditure on advertisement now

Some taxes:

The following taxes are allowed as deduction:

• Banking cash transaction tax
• Securities transaction tax
• Commodities transaction tax
 Sec 37(1)
GENERAL DEDUCTION
Conditions:-
1. The exp. should not be of the nature described under sec
30 to 36
2. It should not be in the nature of capital expense
3. It should not be personal expense of the assessee
4. It should have been incurred in the previous year
5. It should be in respect of business carried on by the
assessee
6. It should have been expended wholly and exclusively for
the purpose of such business
7. It should not have been incurred for any purpose which is
an offence

Examples:
1. Salaries & Wages
2. Utility payments
3. Communication Expenses
4. Bank Charges/ Loan Processing Fee
5. Travelling Expenses
6. Conveyance
7. Commission
8. Many more
 Amounts Expressly disallowed under the Act
Section 40
Section 40A
Section 43B
Sec 40(a)(i)
Interest, royalty, fees for technical services
Payable outside India or payable to a non-resident
Without deduction of tax at source
Sec 40(a)(ia)
Amount payable to resident in the nature of
Interest
Commission or brokerage
Fee for technical services
Fee for professional services
Payment to contractor/ sub contractors
Rent
Royalty
Where tax has not been deducted and paid as prescribed
Sec 40(a)(ic)
Fringe Benefit Tax is not taxable

Sec 40(a)(ii)
Income tax paid/ payable

Sec 40(a)(iia)
Wealth tax paid/ payable

Sec 40(a)(iii)
Salary payable outside India without tax deduction
 Sec 40(a)(iv)
PF payment without deduction of TDS

Sec 40(a)(v)
Tax on perquisite paid by the employer

Amount not deductible in the case of a partnership firm

Sec 40(b)
• Remuneration paid to partners
• Interest to partners

Sec 40A(2)
Payments to relative
Any Expenditure
Paid to relative
To the extent considered excessive or unreasonable

Sec 40A(3)
Payments exceeding Rs.20,000
Paid otherwise by an a/c payee cheque or draft
Exceptions are given in Rule 6DD
Sec 40A (7)
Provision for payment of Gratuity
Allowable only on payment basis
 Sec 40A(9)
Contributions to non-statutory funds

Sec 43B :
Disallowance of unpaid liability
Applicable where mercantile system is followed
Certain expenses are allowed as deduction only on payment
basis
a. Any sum payable by way of tax, duty, cess or fee
b. Any sum payable by an employer by way of
contribution to PF or super annuation fund or any other
fund
c. Any sum payable as bonus or commission to
employees
d. Any sum payable as interest on any loan or
borrowing from a public financial institution
e. Interest on any loan or advance taken from a
scheduled bank including a co-operative bank
f. Any sum payable by an employer in lieu of leave
at the credit of an employee

• Payment of the aforesaid expenses if actually made on or

before the due date of submission of the return of income
and proof is available for the same, then expense can be
claimed
Deemed Profits
Sec 41(1) : Recovery against any deduction

Sec 41(2) : Balancing Charge (Only in case of

power generating units)

Sec 41(3) : Sale of assets used for scientific

research

Sec 41(4) : Recovery of bad debt

Sec 41(4A) : Amount withdrawn from special

reserve

Sec 41(5) : Adjustment of loss (loss not set off in 8

years – business discontinued – notional profit under the
earlier topics available – the loss can be adjusted)

Income from undisclosed sources:

Sec 68 : Cash credit

Sec 69 : Unexplained Investments
Sec 69A : Unexplained money
Sec 69B : Investments not fully disclosed
Sec 69C : Unexplained Expenditure
Sec 69D : Amount borrowed or repaid on hundi

Other provisions:

Sec 44AA : Maintenance of accounts by certain persons

o Specified Profession
o Non specified profession or business
o Specified books of accounts

Sec 44AB : Compulsory Audit of certain person

o Persons carrying on business : TO Rs.40 lakhs &
above
o Persons carrying on profession : Gross Receipts
Rs.10 lakhs & above
o Form 3CA/3CB/3CD
o Due date for getting books audited and submission
of audit report : Sep 30

Sec 43A : Changes in rate of exchange for

assets acquired

Sec 44A : Special provision for deduction

in the case of trade, professional or similar associations
SPECIAL PROVISIONS
Sec42 : Business for prospecting of mineral
oil

Sec 43D : Interest income for banks/

financial institutions following prudential norms of RBI

Sec 44AD: Civil construction business/ (44AF)

retail business

Sec 44AE: Business of plying, leasing or hiring

trucks

Sec 44B: Shipping profits by non-residents