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Section 36 of the Income Tax Act illustrates various expenses that are allowed as a deduction from the income earned from business and profession. Let us look at what expenses are covered under this section.
The interest paid in the above period will not be allowed as a deduction.
Provision for bad debts in case of banks and certain financial institutions- in case of the following banks (scheduled banks, primary agriculture credit society, primary cooperative agriculture bank, rural development bank)
Amount = 8.5% of gross total income + 10% of aggregate average advances by rural branches shall be allowed as a deduction.
For banks incorporated outside India and other financial institutions, 5% of the gross total income shall be allowed as a deduction. The above amount shall be calculated before taking into account any deductions under Chapter VI-A
Further, if the amount transferred to this reserve is withdrawn, it shall be treated as business income in the year of withdrawal.
Marked to market loss or other loss computed in accordance with Income Computation & Disclosure Standards (Ex. mutual funds is an investment which is marked to market).
Let us summarize the above provisions into the deductions that are available and the type of assessee who could avail those deductions.
|Deduction u/s 36 of the Income Tax Act, 1961||Type of assessee (having income from business or profession) eligible for this deduction|
|Insurance premium on stock||Any assessee|
|Insurance premium on life of cattle||Federal milk co-operative society|
|Insurance premium on health of employees||Any assessee|
|Bonus or commission paid to employees||Any assessee|
|Interest on borrowed capital||Any assessee|
|Discount on ZCB||Any assessee|
|Contribution to a recognized provident fund or superannuation fund||Any assessee|
|Contribution to pension fund specified u/s 80CCD||Any assessee|
|Contribution to approved gratuity fund||Any assessee|
|Employees contribution to any welfare funds||Any assessee|
|Animals used in business which have died or become useless||Any assessee|
|Bad debts written off||Any assessee|
|Special bad debts provisions as per limits mentioned in clause (7)||Scheduled banks, non-scheduled banks, banks incorporated outside India, public financial institutions etc.|
|Special reserve created by specified entities||Financial corporation, banking company, housing finance company, public sector companies etc.|
|Expenses for promoting family planning||Assessee being a company|
|Expenditure referred to in clause (10)||Corporation or body corporate|
|Payment to credit guarantee fund trust||Public financial institutions|
|STT paid||Any assessee undertaking business of securities transactions|
|CTT paid||Any assessee undertaking business of commodity transactions|
|Expenses incurred for buying sugarcane||Co-operative society being a sugar manufacturer|
|Marked to market loss||Any assessee|