The Income Tax Act, 1961 allows several deductions for taxpayers which help them to manage their tax liability better. Section 36 of the Income Tax Act allows persons to claim certain expenses incurred during the course of any business or profession as deduction.
Taxpayers can claim such tax benefits while computing their income from businesses or professions. In order to know which expenses are liable for deductions, read on!
Here is a list of expenses that one can claim as deductions:
Section 36 of Income Tax Act allows businesses and professionals to reduce their tax liability by claiming expenses incurred by them while carrying out their operations as deductions. Taxpayers must carefully go through each subsection and claim deductions according to prescribed provisions.
Ans: According to this Section, taxpayers can claim certain expenses as deductions only in the year in which the payments were actually made. IT Department does not allow deductions in the year in which liability occurred.
Ans: Expenses not covered under Sections 30 to 36 and which incur during the course of business are allowed as deductions. Persons can claim such tax benefits to reduce their tax liability.
Ans: Corporations or a body corporate established by a state government or Central Government and notified in the official gazette can claim expenses related to promotion of family planning among their employees. These expenses are not of capital nature and come under eligible deductions as per Section 36 of Income Tax Act.
Ans: Section 36(1)(viia) deals with deduction against provision for bad debt of rural branches of commercial banks. The deduction amount will be equal to 8.50% of the total gross advances plus 10% of aggregate advances given by the rural branches.
Ans: Banks incorporated outside Indian territory can also claim provision for bad debts as a deduction u/s 36. However, this is limited to 5% of their total gross income in the preceding financial year.
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