Tag: Profit and Gains from Business & Professions

Amount not deductible in respect of certain unpaid liabilities

Section 43B is applicable only if the taxpayer maintains books of account on the basis of mercantile system of accounting. The provisions of section 43B are given below— GENERAL RULE – CERTAIN EXPENSES ARE DEDUCTIBLE ON PAYMENT BASIS – The following expenses (which are otherwise deductible under the other provisions of the Income-tax Act) are …

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Amount not deductible under section 40A (3)

The provisions of section 40A (3) are given below – RULE – The following conditions should be satisfied – Condition one – The assessee incurs any expenditure, which is otherwise deductible under the other provisions of the Act for computing business/profession income (e.g., expenditure for purchase of raw material, trading goods, expenditure on salary, etc.). …

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Amount not deductible under section 40A (2)

Any expenditure incurred by an assessee in respect of which payment has been made to the specified persons is liable to be disallowed in computing business profit to the extent such expenditure is considered to be excessive or unreasonable, having regard to the fair market value of goods or services or facilities, etc. As per …

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Amount not allowable under section 40(a)

In the case of any assessee, the following expenses are expressly disallowed under section 40(a): INTEREST, ROYALTY, FEES FOR TECHNICAL SERVICES PAYABLE TO A NON-RESIDENT [SEC. 40(a) (i)] – Disallowance under section 40(a) (i) is attracted if the following conditions are satisfied Condition one The amount paid is interest (not being interest on any loan …

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General deduction under Profit and gains from Business and profession

Section 37(1) is a residuary section. In order to claim deduction under this section, the following conditions should be satisfied: Condition one The expenditure should not be of the nature described under sections 30 to 36. Condition two It should not be in the nature of capital expenditure. Condition three It should not be personal …

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Interest on borrowed capital

Interest on capital borrowed is allowed as deduction if the following conditions are satisfied —   Condition one The assessee must have borrowed money. Condition two The money so borrowed must have been used for the purpose of business. Condition three Interest is paid or payable on such borrowing. Condition one The assessee must have …

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Bonus or commission to employees

Bonus or commission paid to an employee is allowable as deduction subject to certain conditions: Admissible only if not payable as profit or dividend – One of the conditions is that the amount payable to employees as bonus or commission should not otherwise have been payable to them as profit or dividend.. Deductible on payment …

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Amortization of preliminary expenses

Amortization of preliminary expenses means deduction under section 35D is available in case of an Indian company or a resident non-corporate assessee. A foreign company even if it is resident in India, cannot claim any deduction under section 35D. TIME AND PURPOSE OF PRELIMINARY EXPENSES – Expenses incurred at the following two stages are qualified …

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EXPENDITURE ON SCIENTIFIC RESEARCH

The term “scientific research” means “any activity for the extension of knowledge in the fields of natural or applied sciences including agriculture, animal husbandry or fisheries”. With a view to accelerating scientific research, section 35 provides tax incentives. Under this section amount deductible in respect of scientific research may be classified as under: Expenditure on …

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Depreciation

Depreciation shall be determined according to the provisions of section 32. CONDITIONS FOR CLAIMING DEPRECIATION – In order to avail depreciation, one should satisfy the following conditions: Condition 1 Asset must be owned by the assessee. Condition 2 It must be used for the purpose of business or profession. Condition 3 It should be used …

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