Profits and Gains of Business or Profession – Income Tax Provisions

Income Tax Department
Ministry of Finance, Government of India

Fundamentals of PGBP

Profits and Gains of Business or Profession

Introduction

Income from business or profession is taxable under the head “Profits and Gains of Business or Profession” (PGBP) as per Chapter IV, Part D of the Income-tax Act, 1961. The business income shall be computed in accordance with the method of accounting regularly followed by the taxpayer. For the purpose of computation of business income, a taxpayer can follow either mercantile system of accounting or cash basis of accounting. This chapter contains provisions for regular and presumptive methods of income computation.

Computation of Income

• Normal Provisions:
• Income includes revenue and specified capital receipts.
• Deductions allowed for revenue, specific capital expenditures, depreciation, payment-based expenses, and condition-based expenses.
• Additions include non-allowable capital and revenue expenditures.
  • Presumptive Scheme:
• Applicable to small and medium enterprises.
• Income is computed as a percentage of gross receipts/turnover.
• Specified deductions may be allowed.

Speculative Business

Introduction

A speculative business arises from speculative transactions, which are settled otherwise than through actual delivery. Such transactions are deemed speculative businesses under the Income-tax Act.

Key Concepts

Speculative Transaction:

• Defined under Section 43(5) as contracts for the purchase or sale of any commodities, including stocks and shares, that are periodically or ultimately settled other than by actual delivery or transfer of the commodity or scrips.
• The intention of the parties is immaterial; it is the method of settlement that determines the speculative nature.

Exclusions from Speculative Transactions:

1. Hedging Transactions:

• Contracts entered to mitigate future price fluctuation risks in raw materials, inventory, or securities.
• Losses/profits from hedging are treated as business losses/profits.

2. Derivatives Trading:

• Share derivatives: Transactions in recognized stock exchanges are not speculative if registered with SEBI and time-stamped.
• Commodity derivatives: Transactions in recognized exchanges are exempt unless the commodity transaction tax is unpaid (not applicable to agricultural derivatives).

3. Jobbing or Arbitrage by Exchange Members:

• Transactions to safeguard losses in the ordinary course of business for members of forward or stock exchanges.

Conditions for Exemption:

• Transactions must occur in recognized stock exchanges fulfilling Rule 6DDA (shares) or Rule 6DDC (commodities).
• Contract notes must include client identity, PAN, and be time-stamped.

Adventure in Nature of Trade

Introduction

Under Section 2(13) of the Income-tax Act, 1961, an adventure in the nature of trade includes transactions with elements of trade, commerce, or manufacture. Identifying whether income qualifies as business income, capital gains, or other income is significant due to differing tax rates and computation methods.

Key Features

• Continuity Not Mandatory:

• A single or isolated transaction can be deemed an adventure in the nature of trade if it bears elements of trade, even without continuity.

Essential Elements:

1. Intention to Resell:

• • Transactions made solely for resale at a profit are business activities.
  • Resale under changed circumstances does not qualify unless intended at purchase.

2. Connection to Business:

• • Transactions linked to an assessee’s usual business, even indirectly, may constitute an adventure in the nature of trade.

3. Quantity of Purchase:

• • Large-scale purchases, not for personal use or pride of possession, may indicate trade.

4. Alterations:

• • Significant alterations or conversions of a commodity before resale suggest business activity.

5. Organizational Setup:

• • Concerns with adequate business organization for activities align with trade or commerce.

Deemed Business Profits

Introduction

Income chargeable under the head Profits and gains of business or profession includes profits from a business carried on at any time during the previous year. Certain receipts are deemed to be business profits even if the business is no longer in existence, where deductions were allowed in earlier years against the related items.

Receipts Deemed as Business Profits

Recovery Against Loss or Expenditure [Section 41(1)]

Where a deduction was allowed in any earlier year in respect of loss, expenditure or trading liability, and the assessee subsequently obtains any amount or benefit by way of remission or cessation, such amount or benefit is taxable as business income in the year of receipt, even if the business is not in existence.

Balancing Charge [Section 41(2)]

Applicable to tangible assets of electricity undertakings using the straight-line method of depreciation. If the asset is sold, discarded, demolished or destroyed and the money payable plus scrap value exceeds its written-down value, the excess (to the extent of earlier depreciation allowed) is taxable as balancing charge. Any amount exceeding the sum of written-down value and depreciation allowed is taxable as short-term capital gain. These rules apply even if the business is no longer carried on.

Intangible assets are not covered. Balancing charge does not apply where the asset is sold in the same year it was first put to use; such surplus is taxable as short-term capital gain.

Sale of Asset Used for Scientific Research [Section 41(3)]

If an asset acquired for scientific research is sold without being used for other purposes, the lower of the sale proceeds or the deduction allowed is taxable as business income. Excess over cost is taxable as capital gains. If such asset is later used for business, its actual cost is reduced by the deduction allowed. Provisions apply even if the business is not in existence.
Sale includes exchange or compulsory acquisition; sale proceeds include insurance, salvage or compensation money.

Recovery of Bad Debt [Section 41(4)]

Where a bad debt allowed as a deduction is subsequently recovered, any excess of recovery over the amount previously allowed is taxable as business income in the year of recovery, irrespective of the existence of business.

Withdrawal from Special Reserve [Section 41(4A)]

Banks, housing finance companies and financial institutions allowed deduction under Section 36(1)(viii) are taxed on any amount withdrawn from the special reserve account, to the extent deduction was previously allowed. Taxability applies even if the business is not in existence.

Adjustment of Losses Lying Unabsorbed

Where the assessee’s business has ceased and non-speculative business losses arise in the year of cessation, such losses may be set off against income deemed as business profits under these provisions, except income taxed as balancing charge.

Recovery Against Deduction

Introduction

Any amount or benefit received by an assessee in respect of a loss, expenditure or trading liability for which deduction was allowed in earlier years is taxable as income in the year of such receipt.

Conditions for Taxability

Taxability arises when:

• A deduction was allowed in an earlier year for a loss, expenditure or trading liability; and
• In the current year, the assessee obtains any amount or benefit towards such item by way of remission, cessation or recovery.

The amount or benefit so obtained is taxable as business income in the year of receipt.

In Case of Succession

Where a business is succeeded by another person through inheritance or otherwise, and the successor receives an amount or benefit relating to a deduction allowed to the predecessor, such amount is taxable in the hands of the successor.

In Case of Business Restructuring

If an amalgamated company receives an amount relating to a deduction allowed to the amalgamating company, it is taxable in the hands of the amalgamated company.
Similarly, in a demerger, recovery relating to deductions of the demerged company is taxable in the hands of the resulting company.
In case of reconstitution of a partnership firm, any benefit relating to deductions allowed to the predecessor firm is taxable in the hands of the successor firm.

In Case of Unilateral Write-off

If an assessee or successor writes off a trading liability unilaterally in the books of account, such write-off is deemed to be remission or cessation of liability. The amount written off is taxable as business income in the year of write-off.

Computation of Income from Business or Profession

Introduction

Income from business or profession is computed under Section 29 of the Income-tax Act, 1961, following provisions in Sections 30 to 43D. These provisions determine allowable and disallowable expenses for calculating taxable income.

General Principles

• Sections 30 to 43D are not exhaustive. Expenditures or losses incidental to business or profession may be deductible based on ordinary commercial principles, even if not explicitly covered.
• Expenditures expressly prohibited under these sections are not deductible.

Business Losses

Business losses may be allowed if they meet the following conditions:

• Losses are revenue in nature, not capital.
• Incurred during the relevant previous year.
• Incidental to the business or profession.
• Real losses, not fictional or expected.
• Not restricted by any provision of the Act.

Computation of Income

Income is computed either under normal provisions or under the presumptive taxation scheme. Under normal provisions, taxable income from business or profession is calculated as follows:

1. Add: Revenue receipts and specified capital receipts.

2. Deduct:

• • Revenue expenditures.
  • Allowed capital expenditures.
  • Payments and expenditures subject to conditions.

3. Add:

• • Non-deductible capital expenditures.
  • Disallowed expenditures due to non-fulfillment of conditions.

Treatment of Foreign Exchange Fluctuations

Introduction

Foreign exchange fluctuations arising from changes in foreign exchange rates can be classified as either capital account fluctuations or revenue account fluctuations. The tax treatment varies based on this classification, governed by Section 43A, Section 43AA, and the provisions of ICDS-VI (The Effects of Changes in Foreign Exchange Rates).

Types of Foreign Exchange Fluctuations

Capital Account Fluctuations

• Applicable when fluctuations relate to assets purchased for business or profession.
• Adjusted to the actual cost or written-down value (WDV) of the asset in the year of payment.
• Examples:
  • Depreciable assets
  • Capital expenditure on scientific research or patents
  • Cost of acquisition for computing capital gains

Revenue Account Fluctuations

• Gains are taxable under Section 28; losses are deductible under Section 37(1).
• Governed by ICDS-VI, covering:
  • Monetary and non-monetary items
  • Financial statements of foreign operations
  • Forward contracts
  • Foreign currency translation reserves.

Key Provisions for Capital Account Fluctuations (Section 43A)

• Eligibility: Arises when an asset is acquired from outside India for business or profession, and a liability exists for its payment.
• Adjustment:

• Added to or reduced from the cost, WDV, or acquisition cost of the asset.
• Applies even if the asset is transferred but the block of assets exists at the time of payment.
• Does not apply where liability for acquiring the asset is met, directly or indirectly, by someone other than the assessee.
  • Forward Contracts: If a forward contract exists, adjustments are based on the settlement price.
  • Block Ceases to Exist: Gains or losses are deemed capital receipts or expenditures with no tax impact.

Key Provisions for Revenue Account Fluctuations (Section 43AA)

• Gains and losses not linked to capital transactions are treated as revenue fluctuations.
• Taxable or deductible in the year they arise as per ICDS-VI.

Deductions Allowed on Payment Basis

Introduction

Certain expenditures are deductible only on actual payment, regardless of the assessee’s accounting method. These deductions are governed by Section 43B of the Income-tax Act.

• For most payments, deductions are allowed in the year of accrual if paid by the due date for filing the income tax return.
• Overdue payments to micro or small enterprises (MSEs) are disallowed on an accrual basis, even if paid by the return filing due date, and are only allowed in the year of actual payment.

Expenses Deductible on Payment Basis

• Taxes and Duties
  • Includes sums payable as tax, duty, cess, or fee under any law.
  • Deductions are allowed on actual payment, including advanced deposits, but exclude amounts secured via bank guarantees.
• Contributions to Employee Welfare Funds
  • Employer contributions to provident funds, gratuity funds, etc., are deductible if deposited by the return filing due date.
  • Employee contributions are allowed only if deposited by the due date under the relevant fund’s rules.
• Bonus or Commission to Employees
  • Deductible when paid, even if accrued earlier.
• Interest on Loans and Advances
  • Interest payable to banks, financial institutions, or specified non-banking financial companies (NBFCs) is deductible only upon actual payment.
  • Conversion of interest into loans, debentures, or similar instruments does not qualify as payment.
• Leave Encashment
  • Payments for leave encashment are deductible only when paid.
• Payments to Indian Railways
  • Sums payable for the use of railway assets are allowed as deductions upon actual payment.
• Payments to Micro or Small Enterprises (MSEs)
  • Payment to MSME is allowed only in the year of actual payment if paid beyond the Section 15 time limit.
  • Time limits under Section 15 of the MSMED Act, 2006:
    • Payment within the agreed terms (not exceeding 45 days).
    • Payment within 15 days if no terms are agreed upon.

Full Value of Consideration for Transfer of Immovable Property (Other than a Capital Asset)

When land or building (not a capital asset) is transferred for consideration less than its stamp duty value, the stamp duty value is deemed to be the full value of consideration for computing profits and gains, except when within specified safe-harbor limits.

Key Provisions

• Rule:
  • If the consideration received for transferring immovable property is less than the stamp duty value, the latter is deemed as the full value of consideration.
• When Sale Agreement Precedes Registration:
  • The stamp duty value on the agreement date may be used if consideration is paid (wholly or partly) via account payee cheque, draft, ECS, or prescribed electronic modes before the agreement date.

Exceptions

• Safe-harbour Rule

Stamp duty value not exceeding 110% of actual consideration is treated as the full value of consideration.

• Reference to Valuation Officer

If the stamp duty value exceeds the fair market value, and the assessee has not disputed this value in any appeal or litigation, the Assessing Officer may refer the matter to a Valuation Officer.

The deemed full value of consideration will be the lower of:

• • Valuation Officer’s assessed value, or
  • Stamp duty value.

Computation of Income from Construction and Service Contracts

Income from construction and service contracts is computed based on the Percentage of Completion Method as specified under the Income-tax Act and applicable Income Computation and Disclosure Standards (ICDS).

Method of Computation

The provisions apply to:

• Construction Contracts
• Service Contracts

Income from Construction Contracts

• A construction contractrefers to a specifically negotiated agreement for constructing assets that are interrelated in terms of design, technology, function, or ultimate use. This includes contracts for services directly linked to construction (e.g., project managers, architects) and contracts involving destruction/restoration of assets or the environment.
• Income is determined using Percentage of Completion Method, aligning contract revenue with incurred costs at each stage of completion per ICDS-III.
• Revenue considerations:

• • Retention money is included.
  • Incidental income (interest, dividend, or capital gains) is not deducted from contract costs.

Income from Service Contracts

• Percentage of Completion Method:Revenue and associated expenses are recognized similarly to construction contracts, following ICDS-IV.
• Project Completion Method:Revenue is recognized upon completion/substantial completion of the contract. This method applies only to service contracts with a duration not exceeding 90 days and is optional for the assessee.
• Straight Line Method: Revenue is recognized evenly over a specified period for services rendered through multiple acts. This method is also optional and applies when services are performed over a specific timeframe.

Method of Accounting & Turnover

Maintenance of Accounts

Taxpayers are required to maintain books of accounts if their income, turnover, or receipts exceed prescribed thresholds. Books must be maintained at the place of business or profession for six years from the end of the relevant assessment year.

Who Must Maintain Books of Accounts?

Specified Professions: Legal, medical, engineering, architecture, technical consultancy, interior decoration, film artists, accountancy, information technology, etc.

Mandatory, unless opting for presumptive taxation under Section 44ADA.

• Non-specified Professions and Businesses: Thresholds apply:

Individual/HUF: Income exceeding ₹2,50,000 or turnover exceeding ₹25 lakhs in any of the last three years.

Others: Income exceeding ₹1,20,000 or turnover exceeding ₹10 lakhs in any of the last three years.

Presumptive Taxation Cases:

• Books are required if profits are declared below the presumptive rates under Sections 44AD, 44AE , 44BB , or 44BBB .

Books to Be Maintained

Specified Professions (other than company secretary and IT):

Cash book, journal, ledger, carbon copies of bills above ₹25, original bills, and signed vouchers for expenditures.

• Medical Profession:

Additional requirements include Form 3C for daily cases and inventory of drugs and consumables.

• Non-Specified Professions and Businesses:

Books necessary for computing taxable income if thresholds are exceeded.

Where and How Long to Maintain Books

Location:At the place of business or profession; for multiple locations, at the principal or respective locations.

Duration:Six years from the end of the relevant assessment year. If the assessment is reopened under Section 147, books must be retained until the reassessment is completed.

Method of Accounting under Sections 145 and 145A of the Income-tax Act

Introduction

Sections 145 and 145A govern the method of accounting for computing income under the heads Profits and gains of business or profession and Income from other sources. Assessees may follow either the cash system or the mercantile system of accounting, subject to regularity and compliance with notified Income Computation and Disclosure Standards (ICDS).

When Method of Accounting Shall Be Used

Income under the above heads shall be computed in accordance with the method of accounting regularly employed by the assessee. These provisions do not apply to income taxable under Salaries, House Property and Capital Gains.

Certain incomes are deemed taxable in the year of receipt or as specifically prescribed, irrespective of the accounting method. These include:

• Dividend income (including deemed dividend), with interim dividend taxable on payment;
• Interest on securities where no regular method is followed, taxable on becoming due;
• Interest on income-tax refund as per ICDS-IV, taxable on receipt;
• Interest on compensation or enhanced compensation, taxable on receipt;
• Claims for escalation of price or export incentives, taxable when reasonable certainty of realisation arises;
• Government grants or subsidies covered under Section 2(24)(xviii), taxable on receipt if not earlier charged to tax.

Types of Method of Accounting

Mercantile system records income and expenditure on an accrual basis.
Cash system records income and expenditure only on actual receipts or payments.

Different methods may be used for different sources, if regularly and consistently followed and capable of yielding true profits.

Income Computation and Disclosure Standards

The Central Government has notified 10 ICDS applicable from 01-04-2016 for computation of income under the relevant heads. These relate to Accounting Policies, Inventories, Construction Contracts, Revenue Recognition, Tangible Fixed Assets, Foreign Exchange Effects, Government Grants, Securities, Borrowing Costs, and Provisions/Contingent Liabilities.

Rejection of Books of Account

The Assessing Officer may reject books and make a best-judgment assessment where:

• Accounts are incorrect or incomplete;
• Method of accounting is not regularly followed;
• Income is not computed in accordance with ICDS.

A definite finding must be recorded before rejection.

Valuation of Stock

Valuation of stock-in-trade is essential for determining profits.

• Inventory is to be valued at the lower of actual cost or net realisable value in accordance with ICDS-II.
• Section 145A requires inclusion of taxes, duties, cess or fees actually paid or incurred for bringing goods or services to their present location and condition.
• Under the inclusive method, no further adjustments are required. Under the exclusive method, profit or loss must be adjusted for taxes such as GST.
• Unlisted or unquoted securities are valued at actual cost; listed and quoted securities are valued at cost or net realisable value, whichever is lower, category-wise, as per ICDS-VIII.
• For banks, valuation follows RBI guidelines.

Specific situations:

• On conversion of a capital asset into stock-in-trade, fair market value on the date of conversion is deemed sale consideration and becomes the cost of such stock.
• On capital contribution by a partner or member, the amount recorded in the firm’s or entity’s books becomes the value of stock if treated as stock-in-trade.
• On partition of an HUF, the cost to the transferor member is deemed the cost of acquisition, increased by cost of improvement and transfer expenses.
• On inheritance or gift of a non-depreciable asset treated as stock-in-trade, the cost is determined as per the Act based on prior ownership.

Treatment of Tax Paid on Goods: Inclusive vs. Exclusive Approach under Section 145A

The Income-tax Act recognizes two methods for recording transactions related to sales, purchases, and inventories:

• Exclusive Method: Excludes duties or taxes.
• Inclusive Method: Includes duties or taxes.
  Section 145A mandates adjustments for taxes, duties, cess, or fees while computing taxable income under “Profits and Gains of Business or Profession.”

Key Provisions

Mandatory Adjustments:

• Taxes or duties on purchases, sales, and inventories must be included in income computation, even if excluded from books maintained using the exclusive method.
• Inclusive adjustments ensure accurate disclosure in the Income-tax Return (ITR).
  • Treatment in Books of Account:
• Assessees following the exclusive approach in their books need not alter their accounting system.
• Adjustments can be made solely for income computation and ITR preparation.
  • Specific Scenarios:
• Capital Goods:
  • If GST is included in the cost of assets, depreciation is claimed on the gross amount.
  • If Input Tax Credit (ITC) is availed, unutilized ITC is disclosed in “Other Current Assets” in the ITR.
• Inventory and Sales:
  • GST components for purchases and sales must be disclosed separately in relevant ITR sections.
• Composite Dealers:
  • Dealers ineligible for ITC must account for GST paid as part of purchase cost.
• Disclosure Requirements in ITR:
• GST on purchases and sales must be distinctly reported in the trading account or profit and loss section.
• Unutilized ITC is recorded under “Balance with Revenue Authorities.”
  • Compliance Guidance:
• Adjustments ensure adherence to Section 145A without necessitating changes to accounting practices.

Sales Turnover and Gross Receipts under the Income-tax Act

Introduction

• Sales Turnover:Aggregate amount of sales made by an enterprise, considering gross or net turnover (before/after discounts and returns).
• Gross Receipts:All receipts from a profession or business, used for determining tax audit applicability, presumptive taxation, and maintenance of accounts.

Key Considerations

• Inclusions and Exclusions:
• Discounts:
  • Upfront and trade discounts linked to sales are excluded.
  • Cash discounts unrelated to turnover are included.
• Sales Returns:Deducted from turnover, even if from prior years.
• Fixed Assets and Investments:Proceeds from sales are excluded unless held as stock-in-trade.
• Taxes:GST and similar taxes are generally excluded unless specified under Section 145A for income computation.
  • Special Cases:
• Commission Agents:Turnover is limited to the commission unless the agent assumes ownership risks, in which case the full sale price is included.
• Speculative Transactions:Aggregate of favorable and unfavorable differences from contract settlements is considered turnover.
• Derivative Transactions:Turnover includes differences from squared-off trades, premiums on options, and reverse trade differences. Open positions are accounted for when settled.
• Delivery-Based Transactions:Full sale value is included as turnover.
• Investments:Transactions in securities held as investments are excluded unless they are part of business activities.
  • GST Treatment:
• For businesses under GST, taxes charged to customers are excluded from turnover unless integrated under Section 145A for profit computation.
  • Multiple Businesses:
• Aggregate turnover from all businesses is considered unless excluded under specific schemes like presumptive taxation.
  • Professional Receipts:
• Gross receipts include all amounts arising from the profession, such as fees, reimbursements, and incidental charges, but exclude rental income, dividends, and agricultural income.

Specified Modes of Payment

Rule 6ABBA prescribes electronic modes for acceptable receipt and payment of amounts under the Income-tax Act. These modes include credit cards, debit cards, net banking, BHIM, UPI, NEFT, and others.

Relevant Provisions

The following sections mandate payments or receipts through prescribed electronic modes:

• Section 13A: Donations exceeding 2,000.
• Section 35AD: Capital expenditure exceeding 10,000.
• Section 40A: Payments exceeding 10,000 (Rs. 35,000 in specific cases).
• Section 43: Payments exceeding 10,000 for acquiring capital assets.
• Section 43CA, 50C, and 56: Consideration of agreement dates for computing the full value of consideration.
• Section 44AD: Modes for receiving payments to declare presumptive income at 6%.
• Section 80JJAA: Payment of employee emoluments.
• Section 269SS: Loans, deposits, or specified sums of 20,000 or more.
• Section 269ST: Receipts exceeding 2 lakh.
• Section 269T: Repayment of loans or deposits of 20,000 or more.

Prescribed Electronic Modes

The Central Board of Direct Taxes (CBDT) has approved the following modes:

• Credit Cards
• Debit Cards
• Net Banking
• Immediate Payment Service (IMPS)
• Unified Payment Interface (UPI)
• Real Time Gross Settlement (RTGS)
• National Electronic Funds Transfer (NEFT)
• BHIM Aadhaar Pay

Recognition of Stock Exchange for Derivative Transactions

Derivative transactions in shares and commodities are not considered speculative if carried out on a recognized stock exchange. Recognition is granted upon fulfilling specified conditions under Rules 6DDA , 6DDB , 6DDC , and 6DDD .

Key Conditions for Recognition

Share Derivatives ( Rule 6DDA )

A stock exchange must:

• Have SEBI approval and comply with its guidelines.
• Maintain client data, including PAN and unique client identity numbers.
• Retain a 7-year audit trail for cash and derivative market transactions.
• The stock exchange shall ensure that once a transaction in respect of cash and derivative market is registered in the system, it shall not be erased.
• Prevent erasure of registered transactions. Modifications must be limited to genuine errors and reported monthly via Form 3BB.

Commodity Derivatives ( Rule 6DDC )

An association must:

• Have Forward Markets Commission approval and adhere to its guidelines.
• Store client data, including PAN and unique client identity numbers.
• Retain a 7-year audit trail for derivative transactions.
• Prevent erasure of registered transactions. Modifications must be limited to genuine errors and reported monthly via Form 3BC .

Application for Recognition

Submission Process ( Rules 6DDB and 6DDD )

• Applications must be addressed to the Member (Income Tax), CBDT, New Delhi.
• Documents required:

• SEBI/Forward Markets Commission approval.
• Up-to-date rules, bye-laws, and trading regulations.
• Confirmation of compliance with conditions.
• Any additional relevant information.

Decision Timeline

The Central Government must issue a notification for recognition or rejection within four months from the application month’s end.

Validity of Recognition

Recognition remains valid until:

• SEBI or Forward Markets Commission approval is withdrawn or expires.
• The Central Government rescinds the notification.

Building, Plant & Business Assets

Rent, Repairs, Insurance, etc., of Building

Introduction

This provision allows deductions for revenue expenses incurred on premises used for business or profession, including rent, repairs, municipal taxes, and insurance. Only current repairs qualify for deduction.

Deductible Expenditures

Rented Premises

• Rent for premises used as offices, warehouses, or residential quarters.
• Current repairs by the tenant under tenancy terms.
• Land revenue, local rates, or municipal taxes (deductible on a paid basis under Section 43B.)
• Insurance premiums for business premises.

Owned Premises

• Current Repairs: Necessary maintenance repairs, excluding capital improvements or extensions.
• Payment of land revenue, municipal taxes, or local rates (deductible on a paid basis under Section 43B.)
• Insurance premiums for the premises.

Shared Use of Premises

• Rented Premises (Partial Residential Use): Proportional deductions for rent, repairs, and taxes under Section 38.
• Owned Premises (Partial Business Use): Proportional deductions for repair expenses and insurance premiums under Section 38.

Repairs and Insurance of Plant and Furniture

Introduction

Provision of Section 31, allows deductions for repair and insurance expenses related to machinery, plant, or furniture used for business or profession purposes. Only current repair expenses qualify for deduction.

Key Points on Deduction

Eligibility

• The deduction is available only to the owner of the asset if it is used for business or professional purposes.
• It applies only to expenses on current repairs; capital expenditures are not deductible.
• Premiums paid for insuring the asset are also eligible for deduction.

Quantum of Deduction Allowability Conditions:

• Assets must be used for business, even if only part of the year.
• Assets kept ready for use are considered “used” for business, making the related expenses deductible.
• If the asset is partly used for non-business purposes, deductions are allowed proportionately under Section 38.

Deduction Timing

• Under the mercantile system, expenses are deductible in the year incurred.
• Under the cash system, expenses are deductible on a payment basis, including advance payments.

Assets Used Partly or Not Exclusively for Business or Profession

Introduction

When an asset is used partly for personal purposes and partly for business or profession, or not exclusively for business, deductions for expenses and depreciation are limited to a proportionate amount as determined by the Assessing Officer.

Key Provisions

Proportionate Deductions

• Deductions are granted based on the extent of business or professional use of the asset.
• The proportion is determined by the Assessing Officer.

Specific Scenarios

• Dwelling Houses: If part of the premises is used as a residence, deductions for rent, repairs, and related expenses are proportionate to the business use.
• Land Revenue and Taxes: Land revenue, local rates, or municipal taxes are deductible based on the proportionate use of the business.
• Building, Machinery, Plant, and Furniture: Current repairs, insurance premiums, and depreciation are allowable only for the business-use portion of the asset.

Depreciation & Capital Allowances

Depreciation as per Income-tax Act

Introduction

The term ‘depreciation’ means decrease or reduction in the value of an asset over a period of time due to wear and tear or obsolescence. Depreciation allows a business entity to allocate the cost of tangible and intangible assets (except goodwill) over their useful life. It is calculated using the written-down value (WDV) method, except for power generation entities, which may use the straight-line method (SLM). The prescribed depreciation rates are specified in Appendix I and Appendix IA of the Income-tax Rules.

Key Aspects

Types of Depreciation

• Normal Depreciation: Applicable to assets used for business or profession, calculated using WDV or SLM depending on business type.
• Additional Depreciation: Available at 20% for manufacturing businesses under specific conditions.

Rate of Depreciation:

Depreciation is allowed at the rates specified in the New Appendix I on the written-down value of block of assets which are used for the purposes of business or profession of the assessee at any time during the previous year. The rates of depreciation under straight line method are prescribed under Appendix IA.

Eligibility

• Assets must be owned, used for business/profession, and put to use during the relevant year.
• Partially used assets: Deduction is proportional to business use under Section 38.

Special Provisions

• Assets used less than 180 days in a year: Depreciation limited to 50% of the annual rate.
• In business reorganisations (e.g., mergers), depreciation is apportioned between entities based on the number of days for which the asset was used by them.

Exclusions

• Payments exceeding 10,000 in cash for asset acquisition disqualify for depreciation claims.
• Land or goodwill.
• Build-Operate-Transfer (BOT) arrangements allow cost amortization but not depreciation.[Circular No. 9/2014, dated April 23, 2014]

Block of Assets Concept

• Once included in a block of assets, depreciation applies even if specific assets within the block are not used during the year.
• If a block’s written-down value (WDV) becomes zero or ceases to exist, depreciation cannot be claimed.

Rate of Depreciation

Introduction
Depreciation is calculated at specified rates using the written-down value (WDV) or straight-line method (SLM), depending on the type of business. Entities engaged in power generation or distribution may opt for either method, while others must use the WDV method. Assets are grouped into blocks for depreciation purposes, classified into tangible and intangible categories.

Depreciation Rates

• WDV Method: Rates range from 5% to 40% for various asset classes (e.g., buildings, machinery, furniture). [see New Appendix I of Income-tax Rules]
• SLM Method: Applicable to power entities, with rates varying based on asset type (e.g., hydroelectric plants: 3.4%; transformers: 7.81%; temporary wooden structures: 33.4%). [see Appendix IA of Income-tax Rules]

Key Rules for Claiming Depreciation

• Part-Year Usage: Assets used for less than 180 days in a year qualify for 50% of the standard depreciation rate.

Exclusions

• Depreciation is disallowed for cash payments exceeding 10,000 per day for asset acquisition.
• Assets acquired but not used during the year are ineligible for depreciation.

Methods of Depreciation

Introduction

The Income-tax Act, 1961 provides two methods for claiming depreciation:

1. Written Down Value (WDV) Method: Mandatory for all taxpayers except those engaged in generation or generation and distribution of power.

2. Straight Line Method (SLM): Available exclusively for undertakings engaged in generation or generation and distribution of power.

Calculation of Depreciation under the WDV Method

Depreciation under the WDV method is computed in the following steps:

• Step 1: Classification of Assets
  Assets are grouped into relevant “blocks of assets” based on their class (e.g., building, furniture, plant) and depreciation rates as prescribed. Each block includes assets with the same depreciation rate.
• Step 2: Determination of Closing WDV
  Closing WDV is computed as:

• • Opening WDV at the beginning of year
  • Add: Actual cost of assets acquired during the year
  • Less: Sale proceeds of disposed assets
  • Less: WDV of the assets, transferred under ‘slump sale’ falling under that block
• Step 3: Application of Depreciation Rate
  Depreciation is calculated by multiplying the prescribed rate with the closing WDV. For assets used for less than 180 days, only 50% of the applicable rate is allowed.

Calculation of Depreciation under the SLM Method
Applicable only to power generation or distribution undertakings, the SLM method calculates depreciation as follows:

• Option to Adopt SLM
  This option must be exercised before filing the income tax return for the first year of power generation. The option exercised in the first assessment year will be applicable in subsequent years as well.
• Depreciation Calculation

• Total depreciation over the asset’s working life cannot exceed its acquisition cost.
• Depreciation rates are applied to tangible assets; intangible assets are depreciated using the WDV method.
  • Terminal Depreciation and Balancing Charge
    If an asset is sold during its working life, unclaimed cost may be allowed as terminal depreciation, or surplus may be taxed as a balancing charge.

Actual Cost of Assets Used for Business or Profession

Introduction

The term “actual cost” refers to the cost incurred by an assessee to bring an asset to its current location and condition, reduced by any portion of the cost borne directly or indirectly by another party. In certain cases, “notional cost” is used instead of actual cost.

Inclusions in Actual Cost

The actual cost of a fixed asset under the Income-tax Act includes:

Attributable incidental expenses (Acquisition and Installation Costs)

• Purchase price, freight, import duties, and installation expenses.
• As per ICDS-V (Tangible Fixed Assets) any sale proceeds realised from sale of experimental products shall be reduced from cost of acquisition of a fixed asset.

Borrowing Costs

• Interest on borrowings for acquiring the asset until it is put to use (capitalized as per ICDS-IX).

Technical Fees and Commissions

• Payments for technical know-how, erection, or commissioning of machinery.

Exclusions from Actual Cost

• Payments in Cash Exceeding 10,000
  Expenditure paid in non-permissible modes exceeding Rsa. 10,000 in a day is excluded.
• Post-Use Interest
  Interest after the asset is put to use is claimed as a revenue expense under Section 36(1)(iii).
• Subsidy, Grant, or Reimbursement
  Government-provided subsidies that directly or indirectly reduce the cost of the asset are excluded.
• Input Tax Credit
  Taxes eligible for GST or customs credit are not included.
• Incidental Income
  Income related to asset acquisition (e.g., interest on funds temporarily parked) is deducted.

Notional Cost of Fixed Assets
Notional cost is used to determine the actual cost in special situations:

1. Assets Previously Used for Scientific Research

Cost is reduced by the deduction allowed under Section 35 for scientific research.

2. Assets Acquired by Gift or Inheritance

Cost equals the previous owner’s cost, adjusted for depreciation.

3. Re-acquired Asset

If an asset once owned and used for business/profession is re-acquired after transfer, its actual cost shall be the lower of:

• • Re-acquisition price, or
  • Original cost – depreciation actually allowed

4. Sale and Leaseback Transactions
Transferee’s actual cost is deemed the transferor’s written-down value.

5. Transfer within Related Companies

• • Transfers between holding and subsidiary companies or under amalgamations or demergers are carried over at the transferor’s written-down value.

6. Building Brought from Personal Use
Depreciation since acquisition is deducted to compute actual cost.

7. Second-Hand Assets
If acquired to claim excess depreciation, the Assessing Officer may revalue the cost after approval of JCIT.

8. Asset acquired by a non-resident outside India

Actual cost shall be the acquisition price reduced by notional depreciation computed at prescribed rates as if the asset had been used in India from the date of acquisition.

9. Assets under Corporatization Scheme

If an assessee acquires assets through SEBI-approved corporatization of a recognized stock exchange, the actual cost is deemed to be the same as it would have been without such corporatization.

Special Cases

• Trial-Run Income
  Proceeds from experimental sales reduce the asset’s cost as per ICDS-V.
• Assets Acquired Under Specific Modes
  Assets acquired by gift, inheritance, amalgamation, or corporatization are valued per specified provisions, ensuring no double deduction or inflated depreciation claims.

Computation of Written Down Value (WDV)

Introduction

The Written Down Value (WDV) represents the depreciated value of an asset or a block of assets, adjusted for acquisitions and disposals during a financial year. This value is crucial for calculating depreciation under the Income-tax Act, 1961.

General Calculation of WDV

The WDV of a block of assets is computed as follows:

Particulars

• Opening WDV at the beginning of the year
• Add: Actual cost of new assets acquired (excluding goodwill for businesses or professions)
• Less: Money payable for assets sold, discarded, or destroyed, along with scrap value
• Less: WDV of assets transferred in slump sales

Closing WDV

The remaining value represents the closing WDV before applying depreciation.

Special Cases for WDV Calculation

1. Slump Sale

• Net worth, computed as the difference between total assets and liabilities, determines WDV for depreciation.
• Depreciable assets are valued at their individual WDV, as if each was the sole asset in its block.

2. Demerger

• For the demerged company: WDV of transferred assets is deducted from the block’s WDV.
• For the resulting company: WDV of transferred assets in the books of the demerged company is adopted.

3. Business Succession

• WDV is calculated as if the ownership change did not occur, ensuring continuity in depreciation claims.

4. Corporate Restructuring

• In corporatization schemes (e.g., stock exchanges), WDV of transferred assets is carried forward to the successor entity.

5. Exempt Income Period

• If profits were exempt earlier, WDV is adjusted based on notional depreciation for the exemption period.

6. Goodwill Adjustment

• From A.Y. 2021-22, depreciation on purchased goodwill is disallowed. WDV is adjusted to exclude goodwill after deducting depreciation claimed in earlier years.

Key Considerations

• Depreciation Ceases: If WDV becomes nil or the block ceases to exist, depreciation ends, and Section 50 capital gain provisions apply.
• Exempt Income: For entities earning agricultural or other exempt incomes with normal business income, depreciation is computed as if all income were taxable under “Profits and Gains of Business or Profession.”

Depreciation in Case of Sale of Fixed Assets (Income-tax)

Introduction

The treatment of depreciation on the sale of fixed assets depends on the method of depreciation adopted by the assessee:

1. Written Down Value (WDV) Method

2. Straight Line Method (SLM)

Treatment Under the WDV Method

For entities not engaged in the generation or generation and distribution of power, depreciation is computed on a block of assets basis under the WDV method.

• Sale of Fixed Assets within a Block
  The sale proceeds are reduced from the block’s WDV, and depreciation is calculated on the remaining value.
• Block Ceases to Exist
  If entire block of assets has been transferred or it ceases to exist, the scheme of depreciation comes to an end. The difference between the sale consideration and the WDV is treated as short-term capital gain or lossunder Section 50.
• Partial Sale with WDV Nil
  If the sale consideration exceeds the WDV of the block, the surplus is treated as a capital gain under Section 50. No depreciation is allowed on the block for that year or subsequent years.

Treatment Under the SLM Method
Entities engaged in the generation or generation and distribution of power compute depreciation on individual assets under the SLM method.

• Terminal Depreciation
  If the money payable (plus scrap value) is less than the asset’s WDV, the deficiency is deductible as terminal depreciation. This does not apply to intangible assets, which are treated as capital loss under Section 50A.

Particulars	Taxability
Sale price > Actual cost	Sale price – Actual cost = Capital Gains
	Actual Cost – WDV = Profit under the head PGBP
Sale price is upto Actual cost	Actual Cost – WDV =Profit under the head PGBP

• Balancing Charge
  If the money payable (plus scrap value) exceeds the WDV, the surplus is taxable as a balancing charge under Section 41(2) to the extent of previously allowed depreciation. Excess beyond depreciation is treated as a short-term capital gain.

Additional Depreciation

Introduction

Assessees engaged in manufacturing, production, or power generation, transmission, or distribution can claim additional depreciation. This benefit is not available to those in trading, investment businesses, or professional services.

Eligibility

Who Can Claim: Assessees involved in manufacturing, production, or power sector activities. Power units using the straight-line method for depreciation cannot claim additional depreciation.

Who Cannot Claim:

• Assessees opting for concessional tax regimes under Sections 115BA, Sections 115BAA, Sections 115BAB, Sections 115BAC, Sections 115BAD, or Sections 115BAE.
• Unabsorbed depreciation related to additional depreciation cannot be carried forward in such cases.

Eligible Assets

Additional depreciation is allowed for new machinery or plant acquired and used during the same financial year, except for:

• Ships, aircraft, buildings, furniture.
• Second-hand machinery.
• Machinery used in offices or residential accommodations.
• Road transport vehicles.
• Fully depreciated machinery.

Rates

• 20%: If used for less than 180 days, only 10% is allowed in the first year, with the balance in the next year.

Computation of Depreciation in Case of Succession

Introduction

In cases of succession, amalgamation, or demerger, depreciation is computed as if the succession, amalgamation, or demerger had not occurred. The computed depreciation is then allocated between the predecessor and successor entities proportionately.

Applicability

Proportionate depreciation applies in the following cases:

• A firm or sole proprietorship succeeded by a company.
• An AOP/BOI succeeded by a company during demutualization or corporatization of a recognized stock exchange in India.
• A private company or unlisted public company succeeded by an LLP.
• Business or profession succession under Section 170.
• Amalgamation of companies or transfer of undertakings in a scheme of demerger.

Computation Methodology

1. Depreciation Calculation: Compute depreciation for tangible and intangible assets as if no succession or restructuring had occurred.

2. Apportionment: Allocate depreciation between the predecessor and successor based on the number of days the assets were utilized by each.

Unabsorbed Depreciation

Introduction

Unabsorbed depreciation arises when the depreciation allowance exceeds the business profits in a given year. Such unclaimed depreciation can be set off against any other income (excluding salary) and carried forward indefinitely for adjustment in subsequent years.

Treatment of Unabsorbed Depreciation

1. First Preference: Set-off Against Business Profits

• Unabsorbed depreciation can first be adjusted against profits from any other business or profession carried on by the assessee in the same year.

2. Second Preference: Set-off Against Other Income

• If business profits are insufficient, the unabsorbed depreciation can be set off against income under other heads such as house property, capital gains, or income from other sources. However, it cannot be adjusted against:

• • Income under the head “Salaries.”
  • Lottery or similar income taxed under Sections 115BB and 115BBJ.

3. Third Preference: Carry Forward

• If any depreciation remains unabsorbed, it can be carried forward indefinitely. It will be deemed as the current year’s depreciation in subsequent years and adjusted in the same order of preference.

Order of Set-off

1. Adjust current year’s depreciation against business profits.

2. Offset unabsorbed business losses (subject to Section 70, Section 71, and Section 73A).

3. Set off unabsorbed depreciation against the remaining taxable income.

Conditions for Carry Forward

• The entity claiming the set-off must be the same as the one in which the depreciation originated, except in cases like:
• Amalgamation or demerger under Section 72A and 72AA.
• Conversion of a firm or proprietorship into a company as per Section 47(xiii) and 47(xiv).

Scientific Research, Skill & Development Incentives

Deduction for Expenditure on Scientific Research

Introduction Section 35 provides deductions for expenses on scientific research, either conducted in-house or outsourced. It encompasses revenue and capital expenditures related to business, as well as contributions to approved external entities.

Key Provisions

Scientific Research Definition: Activities advancing knowledge in natural/applied sciences, agriculture, or medicine. Research must relate to business for deductions.

In-House Research:

• Revenue Expenditure [Section 35(1)(i)]: Deductible if incurred during business operations or within three years prior to commencement.
• Capital Expenditure [Section 35(1)(iv) and Section 35(2)]: 100% deductible except for land acquisition. Deduction is also allowed for capital expenditure incurred within 3 years prior to commencement of business.
• Expenditure on Approved Research [Section 35(2AB)]: Deductible for companies in biotechnology or manufacturing (excluding Eleventh Schedule items), subject to prescribed approvals.

Payments to External Entities:

• Approved Scientific Research Associations [Section 35(1)(ii)]: Deduction allowed for scientific research donations.
• Universities and Colleges [Section 35(1)(iii)]: Applicable to contributions for scientific, social science or statistical research.
• National Laboratories/IITs [Section 35(2AA)]: Deduction is available to any assessee making payments to a National Laboratory, University, IIT, or other approved institution/person.
• Indian Companies [Section 35(1)(iia)]: Deductible for donations to companies engaged in scientific research.

Deduction Rates:

• In-House Research: 100% of actual expenditure from AY 2021-22.
• Payments to External Entities:
  • Scientific Research: 100% deduction from AY 2021-22.
  • Social/Statistical Research: 100% deduction from AY 2021-22.

Conditions for Deductions:

• Contributions must be made to approved entities.
• Applications for approvals are submitted via prescribed forms and reviewed by authorities.
• Recipients must issue certificates (Form 10BE) and file donation statements (Form 10BD) as per procedure laid down under Rule 18AB.

Consequence of Default:

If such research association, university, college, other institution or company fails to furnish such statement or certificate, it shall be liable for payment of fee under Section 234G. Further, penalty under Section 271K shall also be levied.

Special Provisions:

• Unabsorbed Capital Expenditure: Can be carried forward like depreciation.
• Asset Transfers: Gains from unutilized research assets are taxed under “Business Income” or “Capital Gains.”

Approval of Research Association or College or University under Section 35

Introduction

Section 35 of the Income-tax Act allows deductions for contributions to research associations, universities, colleges, or other institutions for scientific research, social science or statistical research. The deduction applies only if the recipient entity is approved under the Income-tax Act.

Key Provisions and Application Process

Application for Approval ( Rule 5C )

• Institutions or universities must apply in Form 3CF to the Commissioner/Director of Income-tax during the financial year preceding the assessment year for approval.If such association claims exemption under Section 10(21), annexure to the application shall also be filled.
• Applications must be filed electronically, verified with a digital signature or electronic verification code.

Rectification of Application

• Deficiency notices are issued within 1 month of receipt.
• Applicant must rectify deficiencies within 15 days of notice, extendable on request, but not beyond 30 days in total. If unresolved, the application may be deemed invalid after approval from the Central Government.

Grant of Approval

• Applications are reviewed for genuineness, and recommendations are sent to the Member (IT), CBDT within 3 months of receipt.
• The Central Government may request additional information and publish approved institutions in the Official Gazette.

Withdrawal of Approval

• Approval can be withdrawn if activities cease, are found non-genuine, or violate conditions under Rules 5D or 5E .
• A reasonable opportunity to respond must be provided before withdrawal.

Conditions for Approval

For Research Associations ( Rule 5D )

• Sole objective must be scientific, social science, or statistical research.
• Maintain audited books of accounts and file an audit report with the Commissioner/Director of Income-tax by the due date under Section 139(1).
• Submit annual research activity reports, including research notes, published articles, and patents applied for. And submit such statement to the Commissioner/Director of Income-tax by the due date under Section 139(1).
• The Commissioner/Director of Income Tax may, after enquiry, report to the Central Government within six months of filing the return under Section 139(1), if a research association fails to maintain books, furnish audit reports or statements, ceases genuine research activities, or violates approval conditions.

For Universities, Colleges, or Other Institutions ( Rule 5E )

• Funds must be utilized for research purposes, conducted by faculty or enrolled students.
• Maintain audited, separate accounts for research funds and provide an audit report by the due date under Section 139(1).
• The applicant must submit to the Commissioner/Director of Income Tax, by the due date under Section 139(1), a statement detailing research work done, published articles, patents/rights applied or registered, and proposed research projects with financial allocations.
• The Commissioner/Director of Income Tax may, after enquiry, report to the Central Government within six months of the return filing under Section 139(1), if a university, college, or institution fails to maintain books, furnish audit reports or statements, ceases genuine research, or violates approval conditions.

Filing of Intimation by Research Association under Section 35

Introduction

Notifications issued under Section 35(1)(ii)/(iia)/(iii) for research associations, universities, colleges, institutions, or companies before April 1, 2021, remain valid only if these entities file an intimation in Form 10A. The latest due date for filing this intimation is June 30, 2024 [Circular No 7/2024, Dated 25-04-2024]. Valid notifications remain effective for five consecutive assessment years starting from April 1, 2022.

Key Provisions and Filing Process

Filing Intimation

• Form: Intimation is filed in Form 10A with the Principal Commissioner or Commissioner authorised by CBDT.

Documents Required:

• Self-certified copy of the instrument or evidence of establishment.
• Self-certified registration documents (e.g., Registrar of Companies or Public Trusts).
• Registration under the Foreign Contribution (Regulation) Act, if applicable.
• Copy of the existing notification granting approval under Section 35.

Mode of Submission

• Digital Signature or E-Verification Code: Intimation must be filed electronically and verified by the authorised signatory.

Unique Registration Number (URN)

• A 16-digit alphanumeric URN is issued by the Principal Commissioner or Commissioner upon receipt of a valid intimation.

Cancellation of URN

The URN may be cancelled if:

1. The intimation lacks required information or documents.

2. Incorrect or false information or documents are submitted.

3. Submission requirements (manner or verification) are not followed.

Procedure for Cancellation:

• The applicant will be given a reasonable opportunity to present their case before cancellation.
• Upon cancellation, the URN is deemed to have never been issued.

Filing of Statement and Issue of Certificate for Donations Made to Research Institutions

Introduction:

Deduction under Section 35(1)(ii)/(iia)/(iii) is allowed for donations to approved research institutions only if the donee files a statement of donation in Form 10BD and issues a certificate in Form 10BE to the donor.

Eligible Institutions:

The deduction applies to contributions made to:

• Approved research associations (Section 35(1)(ii)/(iii)).
• Approved universities, colleges, or other institutions (Section 35(1)(ii)/(iii)).
• Indian scientific research companies (Section 35(1)(iia)).

Statement of Donation ( Form 10BD ):

• Filing Requirement: Donees must file Form 10BD electronically using a digital signature or Electronic Verification Code (EVC).
• Due Date: Form 10BD must be filed by May 31 of the financial year immediately following the year in which the donation was received.
• Verification: The statement must be verified by an authorized person.

Certificate of Donation ( Form 10BE ):

• Filing Requirement: Donees must issue Form 10BE to donors, specifying the amount donated during the financial year.
• Due Date: The certificate must be issued by May 31 of the financial year immediately following the year in which the donation was received.
• Purpose: This certificate serves as evidence for the donor to claim the deduction.

Determination of Amount Received from Donors:

• All donations of the same nature from a donor in a financial year must be considered.
• If a donation is made jointly, the amount is attributed proportionally among donors unless otherwise specified.

Procedure to Obtain Approval Under Section 35(2AA) and 35(2AB)

Introduction:

Section 35(2AA) allows a deduction for payments made to National Laboratories, Universities, IITs, or specified persons for scientific research upon filing Form 3CG .

Section 35(2AB) provides a deduction for in-house R&D expenditure incurred by companies engaged in biotechnology or manufacturing upon filing Form 3CK

Approval Under Section 35(2AA)

• Eligible Entities: National Laboratories, Universities, IITs, or specified persons.

Application Process:

• File Form 3CG .
• The head of the National Laboratory or the University or the Indian Institute of Technology or Principal Scientific Adviser if he is satisfied that it is feasible to carry out the scientific research programme, pass an order in Form 3CH within two months of receiving the application. However, an order rejecting application shall only be passed after providing a reasonable opportunity of being heard.
• The National Laboratory, University, Indian Institute of Technology or specified person (herein after referred as applicant) shall issue a receipt of payment for carrying out an approved programme of scientific research in Form 3CI .
• Approval Conditions:

• Programme must not relate to market research, sales promotion, quality control, testing, commercial production, style changes, or similar routine activities.
• Prescribed authority to submit Form 3CJ to specified authority within 3 months of granting approval.
• Applicant to submit annual progress and expenditure statement to specified authority.
• Prescribed authority cannot extend programme duration or approve cost escalation.
• Applicant to maintain separate audited accounts for each programme and furnish them by 31st October each succeeding year.
• Assets acquired for the programme cannot be disposed of without specified authority’s approval.
• On completion, applicant to jointly submit:
  • A completion certificate along with a copy of the report on the research activities carried out;
  • Salient features of the result obtained; and
  • Its further application for commercial exploitation;
• Prescribed authority to furnish audited statement of accounts to specified authority within 6 months of completion.

Approval Under Section 35(2AB)

• Eligible Applicants:

Companies engaged in biotechnology or manufacturing (excluding items in the Eleventh Schedule).

• Application Process:

• File Form 3CK .
• The Secretary of the Department of Scientific and Industrial Research (DSIR) issues an order in Form 3CM , if he is satisfied the prescribed conditions are fulfilled. However, an order rejecting application shall only be passed after providing a reasonable opportunity of being heard.

Approval Conditions:

• The R&D facility should not include market research, quality control, testing, or similar activities.
• DSIR submits electronic reports:
  • Part A of Form 3CL for facility approval.
  • Part B of Form 3CL for expenditure eligibility.
• Form 3CL to be submitted electronically to the jurisdictional Principal CCIT/CCIT/PDGIT/DGIT:
  • Within 120 days of approval (Part A).
  • Within 120 days of audit report (Part B).
• Company to keep separate audited accounts for each facility and submit Form 3CLA by due date under Sec. 139(1).
• Disposal of assets requires prior approval from the prescribed authority.

Deduction for Expenditure on Skill Development Project

Introduction

Companies incurring expenditure on notified skill development projects are eligible for deductions under Section 35CCD.

• Assessment Years 2013-14 to 2020-21: Weighted deduction of 150% of actual expenditure.
• From Assessment Year 2021-22 onwards: Deduction is 100% of actual expenditure.

Eligibility

• Companies engaged in manufacturing or production of any article or thing (not being alcoholic spirits and tobacco products) or providing specified services can claim the deduction.
• Deductible expenditure excludes costs for land or buildings and applies only to notified skill development projects.

Skill Development Project Requirements

Training facilities (set up by the Central Government, State Government or Local Authority) must be affiliated to or approved/empanelled by:

• National or State Councils for Vocational Training.
• National Skill Development Agency.
• Relevant Central or State Government authorities.

Projects must provide training to potential or newly recruited employees. Training for employees after six months of recruitment is ineligible. [Press Release, Dated 18-7-2013]

Companies must maintain separate books of account for the project and get them audited.

Application Process

• Eligible companies must apply to the National Skill Development Agency in Form 3CQ , adhering to guidelines under Rule 6AAF .
• Deduction is not available under other provisions of the Act for the same expenditure in any year.

Guidelines for Approval of Skill Development Project

Introduction

For claiming deduction under Section 35CCD, an eligible company must obtain notification for a skill development project. The company is required to apply to the National Skill Development Agency (NSDA) in Form 3CQ and comply with prescribed conditions, including maintenance and audit of separate books of account.

Eligibility and Conditions

A company engaged in manufacture or production of any article or thing other than alcoholic spirits or tobacco products, or a company providing specified services, may claim deduction under Section 35CCD for expenditure (excluding land or building cost) incurred on a notified skill development project.

To obtain notification, the company shall:

• Apply to the NSDA as per Rule 6AAF ; and
• Fulfil the conditions laid down in Rule 6AAG .

A project may be notified only if undertaken by an eligible company in separate facilities of a training institute.

Meaning of Eligible Company

An eligible company includes companies engaged in manufacture or production of articles or things not listed at serial numbers 1 and 2 of the Eleventh Schedule, or companies providing specified services such as accounting, architecture, automobile repair, banking and insurance services, beauty and cosmetology, cable or DTH services, cargo handling, construction, courier services, design, event management, facilities management, fire and safety services, food processing, health and wellness, home décor, healthcare, hospitality, logistics, market research, media, mining, packaging and warehousing, port and maritime services, power sector services, private security, refrigeration and air-conditioning, repair and maintenance, retail marketing, telecom, and travel and tourism.

Meaning of Training Institute

A training institute must be one of the following:

• Set up by the Central Government, State Government or Local Authority;
• Affiliated to National Council for Vocational Training or State Council for Vocational Training;
• Affiliated, approved or empanelled by the NSDA;
• Affiliated or approved by the Central Government and certified by the National Council for Vocational Training as following equivalent standards;
• Affiliated or approved by the State Government and certified by the National Council for Vocational Training or State Council for Vocational Training as following equivalent standards.

Application Process

Before undertaking a project, the eligible company shall submit Form 3CQ in duplicate to the NSDA and send a copy to the jurisdictional Commissioner or Director of Income-tax. An acknowledgement from NSDA must accompany the application.

The application must include:

• Detailed note on the project;
• Estimated expenditure and expected date of completion;
• Letter of concurrence from the training institute.

Defects in Application

If defects are found, NSDA shall intimate the applicant within one month from the date of receipt. The applicant must rectify the defect within 15 days or within an extended period not exceeding 30 days in total. If defects are not rectified, NSDA shall recommend treating the application as invalid, and CBDT may pass an order accordingly.

Recommendations for Approval or Rejection

When the application is complete, NSDA may conduct necessary inquiry and seek documents to verify the genuineness of activities. NSDA shall send its recommendation to CBDT within two months from the end of the month in which a complete application was received.

The jurisdictional CIT or DIT shall separately send recommendations to NSDA within one month of receiving the application copy, after examining compliance with the Income-tax Act.

Issue of Notification

CBDT shall issue notification in Form 3CR within 15 days from the end of the month of receiving NSDA’s report. The notification remains effective for a prescribed period, not exceeding three assessment years. If activities are satisfactory, CBDT may extend the notification in consultation with NSDA.

If NSDA recommends rejection, CBDT shall pass an order rejecting the application.

Withdrawal of Notification

CBDT may rescind the notification at any time if it is satisfied that:

• The company or training institute has ceased activities;
• The activities are not genuine; or
• Activities are not carried out as per provisions or conditions of notification.

An opportunity of being heard shall be provided before withdrawal. Copies of orders shall be sent to the applicant, training institute, NSDA and jurisdictional authorities.

Conditions for Notification

The company must maintain separate books of account for the notified project and have them audited by a Chartered Accountant. The audit report shall comment on:

• True and fair view of accounts;
• Genuineness of activities;
• Fulfilment of relevant conditions.

A project is not eligible where training is provided to existing employees whose training commences after six months of their recruitment.

Expenses Eligible for Deduction

All expenditure incurred wholly and exclusively for a notified project, except land or building cost, is eligible. Any expenditure reimbursed or reimbursable to the company is not eligible.

Furnishing of Audited Statement

On or before the due date under Section 139(1), the company shall furnish to the CIT or DIT the audited statement of accounts, audit report and amount of deduction claimed.

Report for Rescinding Notification

The CIT or DIT may report to CBDT for rescinding the notification if the company has not maintained required books, has not furnished documents, has ceased activities, or its activities are not genuine or not in accordance with provisions or conditions. NSDA may also recommend withdrawal if activities are not genuine.

Investment-Linked & Sector-Specific Deductions

Deduction for Telecom License Fees

Introduction

Assessees incurring capital expenditure for acquiring a license or spectrum for telecommunication services can claim deductions in equal installments over the license or spectrum term.

Deduction for Spectrum Fees [Section 35ABA]

• Eligibility: Assessees who incur capital expenditure to acquire spectrum rights by paying spectrum fee will be allowed deduction for the same.

Deduction Amount:

• For upfront payment: Allowed in equal installments from the year of payment (or commencement of business, whichever is later) until the spectrum term ends.
• For deferred payment: Allowed based on the upfront payment equivalent, spread over the spectrum term.

Conditions: If a deduction is claimed under this provision, no depreciation under Section 32 is allowed for the same expenditure.

Withdrawal of Deduction

If an assessee opts for deferred spectrum fee payment but fails to meet DoT (Department of Telecommunications, Government of India) conditions leading to termination of spectrum, the deduction earlier allowed shall be deemed wrongly allowed. The Assessing Officer will re-compute income of the years in which deduction was claimed and rectify within 4 years from the end of the year of failure. Spectrum fees paid up to termination are treated as “actually paid,” and no reversal is made for such amount. The year of termination is deemed the year of spectrum transfer.

Deduction for Telecommunication License Fees [Section 35ABB]

• Eligibility: Assessees incurring capital expenditure for acquiring telecom licenses.
• Deduction Amount: Allowed in equal installments from the year of payment (or commencement of business, whichever is later) until the license term ends.
• Conditions: Depreciation under Section 32 is not allowed for the same expenditure if claimed under this provision.

Transfer of License or Spectrum

• Entire Transfer:

• If proceeds are less than unamortized expenditure: The difference is deductible in the year of transfer.
• If proceeds exceed unamortized expenditure: The excess is taxable as business income (up to the prior deduction claimed).

Partial Transfer:

• If proceeds are less than unamortized expenditure: The remaining unamortized amount is deductible in equal installments over the unexpired term.
• If proceeds exceed unamortized expenditure: The excess is taxable as business income (up to the prior deduction claimed).

• Business restructuring of Companies

If an amalgamating company (or a demerged company) transfers the telecom license or spectrum in a scheme of amalgamation (or demerger) to Indian amalgamated company (or Indian resulting company), the provisions of amortization of deficiency or deemed profit or capital gains, as the case may be, apply to Indian amalgamated company (or Indian resulting company) in the same manner as they would have applied to the amalgamating company (or demerged company).

Investment Linked Incentives to Specified Business

Introduction

Assessees engaged in specified businesses can claim 100% deduction of capital expenditure incurred for such businesses. Losses from specified businesses can only be set off against profits from similar businesses.

Eligibility

• Businesses eligible include cold chain facilities, warehousing for agricultural produce, distribution pipelines, hotels (two-star and above), hospitals (100 beds or more), slum redevelopment, affordable housing, fertilizer production, and more.
• Certain businesses, like pipeline networks and infrastructure development, are restricted to Indian companies or specified authorities.

Conditions

• Business and plant/machinery must be new (used machinery allowed if its value doesn’t exceed 20% of total plant/machinery value).
• Imported machinery not previously used in India may qualify if no prior depreciation was claimed.
• Assessee is required to maintain books of account and get them audited.
• If an assessee has two units and only one qualifies for deduction, inter-unit transfers of goods or services shall be valued at market valuefor deduction purposes. Further, if transactions with others yield more than ordinary profits, the AO may reasonably re-compute such profits.

Quantum of Deduction

• 100% of capital expenditure, incurred wholly and exclusively for specified business purposes, is deductible in the year of expenditure or business commencement if capitalized.
• No other deductions (e.g., depreciation) are allowed for the same expenditure.
• Losses can be carried forward indefinitely for set-off against profits from the same business.

Exceptions

1. No deduction for cash payments exceeding 10,000 to a single person in a day.

2. Expenditure on land, goodwill, or financial instruments is not deductible.

Withdrawal of Deduction

• Transfer or destruction of assets: Proceeds are taxable as business income.
• Non-specified use: Assets must be used for the specified business for 8 years; otherwise, deductions claimed (adjusted for depreciation) are added back as business income.

Exception: Where an assessee has built a hotel of 2 star or above category, even though he continues to own it, transfers its operations to another person, transferor shall still be deemed to be carrying on the specified business.

Payment for Rural Development Programme

Introduction

Assessees can claim deductions under Section 35CCA for payments made to approved institutions or funds for carrying out rural development programmes. If claimed under this provision, no deduction is allowed under Section 80G for the same payment.

Eligibility

Deductions are available for payments made to:

• Associations or institutions approved before March 1, 1983, for rural development programmes.
• Associations or institutions approved before March 1, 1983, for training individuals in implementing rural development programmes.
• Rural Development Fund notified by the Central Government.
• Notified National Urban Poverty Eradication Fund.

Key Points

• The deduction will not be withdrawn if the approval of the programme or institution is later revoked.
• No double deduction is permitted under this or any other section for the same payment.

Expenditure on Agricultural Extension Project

Introduction

Assessees incurring expenditure on notified agricultural extension projects are eligible for deductions under Section 35CCC.

• Assessment Years 2013-14 to 2020-21: Weighted deduction of 150% of the actual expenditure.
• From Assessment Year 2021-22 onwards: Deduction reduced to 100% of the actual expenditure.

Eligibility

Assessees undertaking projects for the training, education, and guidance of farmers can claim the deduction for projects approved and notified by the Ministry of Agriculture.

Conditions

• Applications must be filed electronically in Form 3C-O with the Member (IT), CBDT, as per Rule 6AAD guidelines.
• Maintenance of books of accounts and audit compliance is mandatory.
• No other deduction under this or any other provision is allowed for the same expenditure in any year.

Deduction of Expenditure on Feature Films

Rules 9A and 9B prescribe the method for computing deductions for costs incurred by film producers and distributors. The deduction is based on the certification and release of the film during the year.

Production of Feature Films ( Rule 9A )

• Cost of Production: Includes all production expenses. Subsidies not included in income are deducted.
• Deduction Allowance: Allowed in the year the film is certified for release. If unreleased, the cost is carried forward.

Other Expenditures:

• Advertisement and print costs incurred after certification are excluded from production costs.
• Abandoned Films: Treated as revenue expenditure under Section 37, not Rule 9A .

Manner of Deduction:

1. Full Rights Sold: Entire production cost is deductible in the year of sale.

2. Exhibition or Partial Sale:

• Full deduction allowed if the film is released commercially 90 days before year-end.
• If released later, deduction is limited to realized revenue. Remaining cost is carried forward.

3. No Rights Sold or Exhibited: Deduction deferred to the next year.

Distribution of Feature Films ( Rule 9B )

• Cost of Acquisition: Includes amounts paid to producers or other distributors. Advertisement and print costs are excluded.

Manner of Deduction:

1. Full Rights Sold: Entire acquisition cost is deductible in the year of sale.

2. Exhibition or Partial Sale:

• Full deduction allowed if released commercially 90 days before year-end.
• Otherwise, limited to realized revenue, with the balance carried forward.

3. No Rights Sold or Exhibited: Deduction deferred to the next year.

Conditions for Deduction

• Minimum Guarantee Basis: Deduction allowed only when guaranteed amounts and excess receipts are credited in the year of deduction.
• Mandatory Record Maintenance: Books of accounts must reflect receipts to claim deductions.

Person	Situation	Quantum of deduction
		Films released on or before 31st December*	Films released after 31st December*
Film producer	He sells all rights of exhibition of the film in the previous year	Entire cost of production	Entire cost of production
	He exhibits the film in all or some of the areas	Entire cost of production	Cost of production, or amount realised, whichever is less**
	He sells the rights of exhibition of the film in respect of some of the areas	Entire cost of production	Cost of production, or amount realised, whichever is less**
	He exhibits the film in certain areas and sells the rights of exhibition of the film in respect of all or some of the remaining areas	Entire cost of production	Cost of production, or amount realised, whichever is less**
	He does not exhibit the film, nor sell the rights of exhibition	Nil***	Nil***
Distributor	He sells all rights of exhibition of the film in the same previous year in which it is acquired by him	Entire cost of acquisition	Entire cost of acquisition
	He exhibits the film on a commercial basis in all or some of the areas, or sells the rights of exhibition in respect of some of the areas, or himself exhibits the film on a commercial basis in certain areas and sells the rights of exhibition of the film in all or some of the remaining areas	Entire cost of acquisition	Cost of acquisition of the film, limited to (i) the amount realised by the film distributor by releasing the film on a commercial basis, or (ii) the amount for which the rights of exhibition has been sold or, as the case may be, (iii) the aggregate of the amounts realised by the film distributor by exhibiting the film and by the sale of the rights of exhibition**
	He does not exhibit the film nor sells the rights of exhibition during the previous year	Nil***	Nil***
* The date will be 1st January in a leap year. ** Balance, if any, is deductible in the immediately succeeding year. *** Enter cost is deductible in the immediately succeeding year.
Person	Situation	Quantum of deduction
		Films released on or before 31st December*	Films released after 31st December*
Film producer	He sells all rights of exhibition of the film in the previous year	Entire cost of production	Entire cost of production
	He exhibits the film in all or some of the areas	Entire cost of production	Cost of production, or amount realised, whichever is less**
	He sells the rights of exhibition of the film in respect of some of the areas	Entire cost of production	Cost of production, or amount realised, whichever is less**
	He exhibits the film in certain areas and sells the rights of exhibition of the film in respect of all or some of the remaining areas	Entire cost of production	Cost of production, or amount realised, whichever is less**
	He does not exhibit the film, nor sell the rights of exhibition	Nil***	Nil***
Distributor	He sells all rights of exhibition of the film in the same previous year in which it is acquired by him	Entire cost of acquisition	Entire cost of acquisition
	He exhibits the film on a commercial basis in all or some of the areas, or sells the rights of exhibition in respect of some of the areas, or himself exhibits the film on a commercial basis in certain areas and sells the rights of exhibition of the film in all or some of the remaining areas	Entire cost of acquisition	Cost of acquisition of the film, limited to (i) the amount realised by the film distributor by releasing the film on a commercial basis, or (ii) the amount for which the rights of exhibition has been sold or, as the case may be, (iii) the aggregate of the amounts realised by the film distributor by exhibiting the film and by the sale of the rights of exhibition**
	He does not exhibit the film nor sells the rights of exhibition during the previous year	Nil***	Nil***
* The date will be 1st January in a leap year. ** Balance, if any, is deductible in the immediately succeeding year. *** Enter cost is deductible in the immediately succeeding year.

Other Provisions

• Section 285B Compliance: Producers must submit a statement under Section 285B for payments exceeding 50,000 to individuals involved in production.
• Assessing Officer’s Discretion: The officer may adjust the deduction method in exceptional cases.

Amortisation & Special Reserves

Tea, Coffee, or Rubber Development Account

Introduction

The deduction under Section 33AB is available to assessee engaged in the business of growing and manufacturing tea, coffee, or rubber in India are eligible for deductions if they deposit funds in specific accounts for development purposes. These funds must be used as per the prescribed conditions, and misuse results in withdrawal of the deduction.

Eligibility

Who Can Claim:

• Assessees engaged in growing and manufacturing tea, coffee, or rubber in India.
• The deduction is unavailable if only growing or only manufacturing operations are conducted.

When Deduction is Allowed:

• Deposits must be made in:
  • A special account with NABARD under schemes approved by the Tea, Coffee, or Rubber Board.
  • A deposit account under schemes framed by the Tea, Coffee, or Rubber Board and approved by the Central Government.
• Deposits should be made within six months from the end of the previous year or before the due date for filing the return, whichever is earlier.

Quantum of Deduction

Lower of:

• The amount deposited in the specified accounts.
• 40% of profits from the business of tea, coffee, or rubber before claiming this deduction.

Such deduction is allowed before making any deduction of carried forward business losses under Section 72.

Claim of Deduction

To claim this deduction, the assessee is required to get his accounts audited by a Chartered Accountant and furnish the report of such audit electronically in Form 3AC before one month prior to due date of furnishing return of income under section 139(1).The audit shall not be mandatory if accounts are required to be audited under any other law and the audit report as per that law is obtained along with a report in Form 3AC for the purposes of this provision.

Withdrawal of Funds

Funds can be withdrawn for specified purposes or under circumstances like business closure, death, or liquidation. Misuse or non-utilization of funds results in the withdrawal of deductions.

1. Closure of Business:

• On business closure or firm’s dissolution, withdrawn deposit is taxable as business income. But no tax arises if withdrawn due to death of assessee, HUF partition, or company liquidation.

2. Non-Permitted Use:

• If funds are used for ineligible assets (e.g., office equipment, fully depreciated assets), the amount utilized is added to business income.

3. Non-Utilization:

• Unutilized withdrawn funds are deemed business income.

4. Asset Sale Within 8 Years:

• If assets acquired under the scheme are sold within eight years, proportionate deductions are withdrawn. The deduction to be withdrawn shall be calculated as under:

Total Amount of deduction allowed	x	Deposit utilized to purchase asset which is sold within 8 years
		Total amount of deposit utilized

• Exceptions apply for transfers to government entities or succession under specific conditions.

Taxability on withdrawal of deduction:

As income from tea plantation (or coffee or rubber plantation) is treated as income partly from agriculture operations and partly from business activities, the amount to be taxed, out of the deduction withdrawn under this provision, shall be computed in accordance with Rule 7A, Rule 7B or Rule 8.

Double Deduction

Where amount deposited has been allowed as deduction in any previous year, no deduction shall be allowed in respect of such amount in any other previous year.

No Deduction to Partner or Member

In case of a Firm, AOP or BOI, No deduction shall be allowed for the amount deposited while computing the income of any partner or member, as the case may be.

Site Restoration Fund

Introduction

The deduction under Section 33ABA is available to assessees engaged in prospecting, extracting, or producing petroleum or natural gas or both in India under an agreement with the Central Government. The deduction is for deposits made into a special or site restoration account.

Eligibility and Conditions

• Who Can Claim: Businesses involved inprospecting for or extracting or production of petroleum/natural gas or both in India under an agreement with the Central Government agreement.

Deposit Accounts:

The deduction is available when assessee deposits amount in the following accounts:

• Special account with SBI under a scheme approved by Ministry of Petroleum and Natural Gas.
• Site restoration account under a scheme by the Ministry of Petroleum and Natural Gas.

Interest credited to these accounts is also treated as a deposit for the purposes of deduction under this provision.

• Timeframe: Deposits must be made before the end of the previous year.
• Amount of Deduction: Lower of:

• Amount deposited (including interest).
• 20% of business profits before any deductions under this section.

Such deduction is allowed before making any deduction of carried forward business losses under Section 72.

Procedure to Claim Deduction

• Accounts must be audited by a Chartered Accountant.
• Submit the audit report electronically in Form 3AD one month before the due date for filing the return of income under Section 139(1).

Utilization and Withdrawal

Permissible Uses: Funds can only be withdrawn for:

• Equipment and installation removal under an abandonment plan.
• Site restoration as per petroleum industry standards.
• Expenses to prevent hazards post-agreement expiry or termination.
  • Non-permitted Uses: Utilization for specified assets (e.g., office appliances) or any purpose beyond the scheme renders the amount as taxable business income.
  • Unutilized Amount: Funds not used as per the scheme are treated as taxable business income.
  • Asset Sale Within 8 Years:
• If assets acquired under the scheme are sold within eight years, proportionate deductions are withdrawn. The deduction to be withdrawn shall be calculated as under:

Total Amount of deduction allowed	x	Deposit utilized to purchase asset which is sold within 8 years
		Total amount of deposit utilized

• Exceptions apply for transfers to government entities or succession under specific conditions.
  • Double Deduction
• Where amount deposited has been allowed as deduction in any previous year, no deduction shall be allowed in respect of such amount in any other previous year.
• No Deduction to Partner or Member

• In case of a Firm, AOP or BOI, No deduction shall be allowed for the amount deposited while computing the income of any partner or member, as the case may be.

 

Amortisation of Certain Preliminary Expenses

 

Introduction

Indian companies or resident non-corporate assessees can claim deductions under Section 35D for preliminary expenses in 5 equal instalments starting from the year of business commencement, new unit operation, or undertaking extension.

Eligible Expenses

• For all assessee: the following expenses shall be treated as preliminary expenses.

• Preparation of feasibility and project reports.
• Conducting market or business surveys.
• Engineering services for business
• Legal charges for drafting business agreements.
• The assessee shall be required to furnish a statement in Form No. 3AF for each previous year containing the particulars of expenditure as specified above (other than legal charges) to the prescribed income tax authority. This statement shall be furnished 1 month before the due date for furnishing the return of income under Section 139(1). The statement in Form No. 3AF shall be furnished electronically under digital signature where a person is required to furnish return of income electronically under digital signature. In any other case, the statement shall be furnished electronically through Electronic Verification Code (EVC).
• Prescribe income tax authority means PDGIT/DGIT (Systems), or any authorised person.
  • For companies(Additional): a company assessee may also claim a deduction for the following expenditure:
• Legal charges for drafting and printing of the Memorandum and Articles of Association.
• Registration fees under the Companies Act, 2013.
• Expenses for issue of shares for public or debentures, including underwriting commission, brokerage, drafting charges, typing, printing, and advertisement of the prospectus.

Quantum of Deduction

1. Calculate Qualifying Amount:

• Lower of actual expenses or 5% of the project cost (or capital employed, at the option of the Indian companies).
  1. Allowable Deduction:
• 1/5th of the qualifying amount each year for 5 years.

Business Restructuring

• In amalgamation or demerger, deductions transfer to the successor Indian company for the unexpired period.

Other Conditions

• The assessee, other than a company or a co-operative society, must have its books of account audited and submit Form 3AE one month before the return filing deadline under Section 139(1) for the first year in which the deduction is claimed.

Amortisation of Expenditure of Amalgamation or Demerger

Introduction

Indian companies can claim deductions under Section 35DD for expenses incurred on amalgamation or demerger over five equal instalments in successive years.

Eligibility

• Only Indian companies incurring expenses related to amalgamation or demerger are eligible for this deduction.

Quantum of Deduction

• The entire expenditure is allowed as a deduction in five equal instalments.
• The first instalment is deductible in the year of amalgamation or demerger.

Restriction

• Deductions claimed under this provision cannot be claimed under any other provision of the Income-tax Act.

Expenditure Incurred on Voluntary Retirement Scheme

Introduction

Employers can claim deductions under Section 35DDA for payments made under a Voluntary Retirement Scheme (VRS) in five equal instalments over five successive years.

Eligibility

• The deduction applies to compensation paid to employees as part of a VRS.
• The first instalment is deductible in the year the amount is paid to the employees.

Quantum of Deduction

• The entire compensation is deductible in 5 equal instalments starting from the year of payment.
• No other deduction under any provision is allowed for the same expenditure.

Business Reorganization

• If the business undergoes reorganisation (e.g., amalgamation, demerger, or conversion), the successor entity is entitled to claim the remaining deductions for the unexpired period.

Expenditure on Prospecting of Minerals

Introduction

This provision allows Indian companies and resident assessees engaged in prospecting, extraction, or production of minerals to claim deductions under Section 35E for specified expenditures over 10 equal instalments.

Eligibility

An Indian Company and every resident assessee who is engaged in any operations relating to prospecting for, or extraction or production of, any mineral specified in Part A or Part B of the Seventh Schedule can claim a deduction under this provision.

Qualifying Expenditure

The deduction can be claimed for the qualifying expenditure incurred in the year of commercial production or in any 4 years immediately preceding the year of commercial production, which

Includes:

• Expenses incurred on any operation relating to prospecting of any mineralspecified in the Seventh Schedule.
• Expenditure on the development of a mine or other natural deposit of any such mineral.
• Sale, salvage, compensation, or insurance moneys realised in respect of any property or rights shall be reduced from such expenditure.

Excludes:

• Costs for acquiring sites or mineral deposits (or any right therein).
• Depreciable asset costs (buildings, machinery, etc.).

Quantum of Deduction

• Allowed in 10 equal instalments over 10 years, beginning with the year of commercial production.
• Deduction limited to profits from the commercial exploitation of the mineral.
• Unused deductions can be carried forward within the 10-year period but lapse thereafter.
• Once deduction is allowed for qualifying expenditure, no deduction for the same expenditure is permitted under any other provision for that or any other year.

Business Restructuring

For amalgamations or demergers, deductions transfer to the successor company for the unexpired period.

Other Conditions

The assessee, other than a company or a co-operative society, must have its books of accounts audited and submit Form 3AE one month before the return filing deadline under Section 139(1) for the first year in which the deduction under Section 35E is claimed.

Deductions in case of the business of prospecting, etc., of mineral oil

Introduction

The Income-tax Act allows specific deductions for expenses incurred in the business of prospecting, extracting, or producing mineral oils, petroleum, or natural gas, provided these expenses are covered under an agreement with the Central Government.

Eligibility Criteria

• Applicable to both resident and non-resident assessees engaged in the business of prospecting, extracting or producing mineral oils, petroleum or natural gas.
• The Central Government must have entered into an agreement directly or through an authorised entity for participation or association with the assessee.
• Deductions may be allowed in lieu of or in addition to other permissible deductions.

Eligible Expenses

• Expenditure on infructuous or abortive exploration in any area surrendered before starting commercial production.
• Any expenditure, whether incurred before or after commercial production, on drilling, exploration activities, services, or related physical assets shall be allowed as a deduction only after commercial production begins.
• Depletion of mineral oil in the mining area from the year in which commercial production begins and for the subsequent years as specified in the agreement.

Provisions for Business Transfer

If the business is transferred wholly or partially, or if any interest in the business is transferred:

• Deduction of Deficiency: If unclaimed expenses exceed transfer proceeds, the difference is deductible in the year of transfer.
• Taxability of Excess Amount: If transfer proceeds exceed unclaimed expenses, the excess, to the extent already claimed as a deduction, is taxable as business income.
• This provision does not apply to transfers under schemes of amalgamation or demerger where the resulting or amalgamated company is an Indian company.
• The successor company continues to claim deductions as if no restructuring occurred.

Financial & Employee-Related Deductions

Deduction for Interest on Borrowed Capital

Introduction

Interest on capital borrowed for business or profession is allowable as deduction. However, interest relating to the period before a capital asset is put to use must be capitalised and added to the actual cost of the asset.

Conditions to Claim Deduction

Where money is borrowed to acquire an asset, interest up to the date the asset is first put to use is added to its actual cost in accordance with Section 43(1). After the asset is put to use, interest on such borrowings is deductible. Interest on borrowings for operational purposes is also deductible.

ICDS IX requires capitalisation of borrowing costs relating to qualifying capital assets; other borrowing costs are deductible in the year incurred. Borrowing includes periodical recurring subscriptions paid by members of Mutual Benefit societies that meet prescribed conditions.

Capital Must Be Borrowed

Interest must be paid on capital borrowed for business or profession. Borrowed “capital” refers to money, not assets. Purchase of an asset on deferred credit, even if interest is payable, is not treated as borrowing; interest on such credit purchases is not deductible under this section but may be allowable under Section 37(1).

Borrowings Used for Business

Interest is deductible only if the borrowed funds are used for business or professional purposes.

Interest Paid or Payable

Under the cash system, interest is deductible on payment; under the mercantile system, it is deductible on accrual.

However, interest payable to the following institutions is deductible only on actual payment in accordance with Section 43B:

• Public Financial Institutions
• State Financial Corporations
• State Industrial Investment Corporations
• Scheduled Banks
• Co-operative banks other than primary agricultural credit societies or primary co-operative agricultural and rural development banks

If paid on or before the due date for filing the return, deduction is allowed in the year of accrual; otherwise, it is allowed in the year of payment.

Interest Expense to Be Disallowed

Interest paid outside India without deduction of tax is disallowed under Section 40(a)(i).
Interest paid to a resident without deduction of tax results in 30% disallowance under Section 40(a)(ia).

Excessive interest (thin capitalisation rule):

If an Indian company or PE of a foreign company pays interest exceeding Rs. 1 crore to a non-resident associated enterprise, interest exceeding 30% of EBITDA is disallowed. Disallowed interest may be carried forward for up to 8 assessment years.

Interest for earning exempt income:

If borrowed funds are used to earn exempt income, interest and related expenditure are disallowed under Section 14A.

Interest paid to partners:

Interest paid by a firm to its partners is deductible only up to 12% per annum and only if authorised by the partnership deed.

Interest paid by AOP/BOI to members:

No deduction is allowed for any such interest.

Interest on own capital:

Interest on notional capital introduced by the assessee is not deductible.

Interest on money borrowed to pay tax:

Interest on borrowings used for payment of income-tax is not deductible.

Deduction for Interest Paid to Associated Enterprise

Introduction

Interest paid by an entity to its associated enterprise is deductible only to the extent of 30% of its earnings before interest, taxes, depreciation and amortisation (EBITDA) or the interest paid or payable to the associated enterprise, whichever is lower. Any excess interest disallowed may be carried forward for eight assessment years.

Purpose of the Provision

This provision restricts excessive interest deductions arising from high levels of debt, particularly in multinational group structures where interest can be used to shift profits outside India. It aims to counter cross-border profit shifting through inflated interest payments and protect the tax base.

When This Provision Applies

It applies where:

• The assessee is an Indian company or a permanent establishment of a foreign company in India;
• Interest expenditure exceeds Rs. 1 crore in respect of any debt issued by a non-resident; and
• The lender is an associated enterprise, or the associated enterprise has provided implicit or explicit guarantee to the lender, or deposited matching funds with the lender.

When This Provision Does Not Apply

This restriction does not apply if the entity:

• Is engaged in the business of banking or insurance;
• Is a notified class of non-banking financial company;
• Is a finance company located in an International Financial Services Centre carrying out specified lending, factoring, treasury or similar financial activities, provided the interest is payable in foreign currency.

Amount of Interest Deductible

Deduction is restricted to the lower of:

• Interest paid or payable to the associated enterprise; or
• 30% of EBITDA.

Negative EBITDA results in complete disallowance of interest. Disallowance applies even if the borrowing is for business purposes and the interest rate is at arm’s length under transfer pricing rules.

Carry Forward and Set Off of Excess Interest

Excess interest disallowed may be carried forward for up to eight assessment years. It may be claimed as deduction in a subsequent year to the extent of the maximum allowable limit (i.e., 30% of EBITDA after allowing current-year interest).

Computation of Excess Interest

The following steps are applied:

1. Compute interest paid or payable to the associated enterprise.

2. Compute EBITDA.

3. Compute 30% of EBITDA.

4. Determine deductible interest as the lower of steps 1 and 3.

5. Excess interest = interest paid or payable minus deductible interest.

Profits and gains of business are then recomputed by adding excess interest disallowed and reducing any eligible set-off of carried-forward interest.

Meaning of Certain Terms

Associated Enterprise

Has the meaning assigned under Section 92A(1)/(2). It may include non-business entities if they meet the control or participation criteria.

Debt
Means any loan, financial instrument, finance lease, financial derivative or similar arrangement giving rise to interest, discounts or finance charges deductible in computing business income. Debt must be issued by a non-resident.

Permanent Establishment

A fixed place of business through which the enterprise wholly or partly carries on its business.

Interest
Includes interest payable in any manner on money borrowed or debt incurred, and fees or charges in respect of unused credit facilities.

Non-banking Financial Company

Includes financial institutions or companies engaged in accepting deposits or lending, and such notified non-banking institutions.

Meaning of Zero Coupon Bond under Income-tax

Introduction

Zero Coupon Bonds are bonds issued by specified entities and notified by the Central Government, where no payment or benefit is received or receivable by the investor before maturity. Only bonds notified by the Government qualify as Zero Coupon Bonds.

What is a Zero Coupon Bond

A Zero Coupon Bond is a bond issued on or after 1 June 2005 by:

• Infrastructure Capital Company
• Infrastructure Capital Fund
• Infrastructure Debt Fund
• Public Sector Company
• Scheduled Bank

No interim payment or benefit should be receivable before maturity. Such bonds must be notified by the Central Government in the Official Gazette.

How Zero Coupon Bonds Are Notified

As per Rule 8B, an application must be submitted in Form 5B at least three months before the proposed issue.

The application cannot relate to bonds to be issued beyond two financial years following the year of application.

Applications must be furnished electronically and are to be disposed of within six months of receipt.

Documents Required

Each application must include a copy of the incorporation certificate, registered trust deed or the relevant Act under which the applicant is constituted.

Conditions to Be Satisfied for Notification

The following conditions must be fulfilled:

• The life of the bond must be at least 10 years and not more than 20 years.
• The applicant must hold an investment-grade rating from at least two credit rating agencies.
• Arrangements must be made for listing the bonds on a recognised stock exchange in India.

Specific investment or utilisation conditions apply based on the category of issuer:

Infrastructure Capital Company/Fund or Infrastructure Debt Fund:

• At least 25% of the funds must be invested by the end of the next financial year after the year of issue.
• The balance must be invested within four financial years following the year of issue.

Public Sector Company:

• At least 15% must be invested or utilised by the end of the next financial year after the year of issue.
• The balance must be invested or utilised within six financial years following the year of issue.

Infrastructure Debt Fund:

• A sinking fund must be maintained to accumulate interest accruing on all Zero Coupon Bonds, and such interest must be invested in Government securities as defined under the Government Securities Act, 2006.

The Central Government, after ensuring compliance with all conditions, will notify the bond specifying the name, life of the bond, issue schedule, maturity amount, discount and number of bonds.

If conditions are not fulfilled, the application may be rejected after providing an opportunity of being heard.

Post-notification non-compliance may lead to withdrawal of notification.

Post-Notification Compliance

The issuer must submit a certificate in Form 5BA from a Chartered Accountant within two months from the end of each financial year in which investment or utilisation was required. The certificate must be e-filed.

Failure to comply may result in withdrawal of the notification by the Central Government.

Deduction for Employer’s Contribution to PF and Superannuation Fund

Introduction

Employer’s contribution to a recognised provident fund or approved superannuation fund is deductible on actual payment. The total deductible contribution to provident fund and superannuation fund together shall not exceed 27% of the employee’s salary as specified under Rule 87.

Deduction for Contribution to Provident Fund

Employer and employee contribute monthly to the provident fund account. Deduction for employer’s contribution is allowed in the year of actual payment, regardless of the method of accounting. If the contribution is paid on or before the due date of filing the return for the year in which liability accrues, the deduction is allowed in that year.

The employer must make effective arrangements to ensure deduction of tax at source under Section 192A on payments made from the fund that are taxable under the head Salaries.

Conditions to Claim Deduction (PF)

• Contribution must be actually paid.
• Payment made up to the due date of filing the return for the year of accrual is treated as paid during that year.
• Effective arrangements must exist to ensure TDS deduction on taxable payments from the fund.

Deduction for Contribution to Superannuation Fund

Superannuation is a retirement benefit funded by employer contributions. Employers may contribute up to 27% of an employee’s basic salary (including the PF contribution), and any excess is taxable in the employee’s hands.

How Much Deduction Is Allowed (Superannuation Fund)

Deduction for employer’s contribution is computed as follows:

Step 1: Employer’s annual contribution for an employee cannot exceed 27% of salary, reduced by the PF contribution (recognised or unrecognised) made for that employee.

Step 2: 80% of the amount actually paid constitutes the deductible allowance.

Step 3: One-fifth of the deductible allowance is allowed in the assessment year relevant to the year of payment, and the balance is allowed in equal instalments over the next four assessment years.

These additional conditions for percentage limitation and spreading over five years arise from CBDT instructions, not the Act.

Conditions to Claim Deduction (Superannuation Fund)

• Contribution must be actually paid.
• Payment made up to the due date of return filing for the relevant previous year is deductible in that year.
• Employer must ensure effective arrangements for TDS deduction on taxable payments from the superannuation fund.

Deduction for Employees’ Contribution to Welfare Fund

Introduction

Any sum received by an employer from employees as their contribution to a welfare fund such as provident fund or ESI is allowable as deduction only if it is deposited by the employer into the employee’s account in the relevant fund on or before the due date prescribed under the applicable Act.

Employees’ Contribution Treated as Employer’s Income

Under Section 2(24)(x), any amount received by an employer from employees towards their contribution to recognised provident fund, approved superannuation fund, approved gratuity fund or any other welfare fund is deemed to be business income of the employer and must be credited to the profit and loss account.

When Deduction Is Allowed

Deduction is allowed only if the employer deposits the employees’ contribution into the relevant fund on or before the statutory due date specified under the respective labour law or service contract.

The Explanation to Section 36(1)(va) clarifies that:

• “Due date” means the date by which the employer is required to credit the contribution under the relevant Act or contract.
• Section 43B does not apply for employees’ contribution and is deemed never to have applied for this purpose.
• Deduction is not allowedif the contribution is deposited after the statutory due date, even if paid before the due date for filing the income-tax return under Section 139(1).

Deduction for Bad Debts

Introduction

A deduction for bad debts is allowable in the year in which the debt is actually written off in the books of account. The debt must have been considered in computing taxable income or must represent money lent in the ordinary course of banking or money-lending business. Any subsequent recovery is taxable as business income in the year of recovery.

Conditions to Claim Deduction

Existence of Debt

There must be an admitted debt creating a debtor–creditor relationship. A debt not recorded in the books cannot be claimed as bad debt unless it was recognised for income computation under ICDS; in such cases it is deemed to be written off when it becomes irrecoverable.

Debt Must Be Written Off

The debt must be written off as irrecoverable in the accounts of the assessee during the year. A mere provision for bad and doubtful debts is not allowable, except for specified entities eligible under Section 36(1)(viia).

Debt Considered for Computation of Income

A bad debt is allowable only if the amount was previously taken into account in computing income or represents lending in the ordinary course of banking or money-lending. Bad debts cannot arise where accounts are maintained on cash basis. If a debt accounted for under ICDS becomes irrecoverable without being recorded in the books, the deduction is allowed on a deemed write-off basis.

Debt Must Be Incidental to Business

The debt must arise from business or professional activities. Debts unrelated to business or profession are not allowable as bad debts.

Continuity of Business

Deduction is allowed only for debts of a business carried on during the relevant previous year. A bad debt relating to a discontinued business is not deductible, unless the business continues through succession. The right to claim bad debts attaches to the business, not to the assessee.

Recovery of Bad Debts

If recovery is less than the outstanding amount, the deficiency is allowed as deduction in the year of final recovery.

If recovery exceeds the amount written off and allowed, the excess is taxable as business income in the year of recovery, irrespective of whether the business is in existence.

In cases of succession (including amalgamation, demerger, inheritance or partnership reconstitution), recovery is taxable in the hands of the successor if the deduction was earlier allowed to the predecessor.

Business losses from the year of discontinuance may be set off, even after expiry of the eight-year limit, against income deemed as business profits under this provision.

Deduction for Provision for Bad and Doubtful Debts

Introduction

The deduction for provision for bad and doubtful debts is available only to specified entities such as banks, financial institutions and NBFCs. The deduction allowed is the lower of the amount of provision created or the amount computed as a prescribed percentage of total income or rural advances, as applicable.

Eligible Assessees

The deduction is available to:

• Scheduled banks
• Non-scheduled banks
• Co-operative banks (other than primary agricultural credit societies or primary co-operative agricultural and rural development banks)
• Foreign banks
• Public financial institutions, State financial corporations and State industrial investment corporations
• NBFCs

Other assessees are not eligible for deduction of provision; they may claim only actual bad debts under Section 36(1)(vii).

Amount of Deduction

The deduction allowable is the lower of the actual provision created or the amount computed based on prescribed percentages of total income and, where relevant, aggregate average rural advances.

Prescribed percentages depend on the category of institution.

Additional Deduction

Scheduled banks (other than foreign banks) and non-scheduled banks may claim an additional deduction equal to income derived from redemption of securities under a notified scheme, provided such income is disclosed under the head Profits and gains of business or profession.

Meaning of Key Terms

• Total income is computed before deduction under this provision and before Chapter VI-A deductions.
• Rural branch means a branch located in an area with population not exceeding 10,000 based on the latest published census.
• Aggregate average advances of rural branches are computed by taking the monthly outstanding advances of each rural branch, averaging them over the year, and aggregating such averages for all rural branches.

Claiming Deduction for Actual Bad Debts

For eligible entities, deduction for actual bad debts under Section 36(1)(vii) is allowed only to the extent the amount written off exceeds the credit balance in the provision for bad and doubtful debts account.

No deduction is allowed unless the bad debt is debited to this provision account.

Taxability of Recovered Debts

Any recovery of debts for which deduction has been allowed under this provision is taxable under Section 41(1) in the year of recovery.

Treatment of Urban and Rural Advance Provisions

Provisions for bad and doubtful debts relating to urban and rural advances are to be treated as a single consolidated account for all purposes.

Deduction for Sum Transferred in Special Reserve

Introduction

Banks, housing finance companies and financial institutions may claim deduction for amounts transferred to a special reserve account. Deduction is restricted to 20% of profits from eligible business. When the total balance in the special reserve exceeds 200% of the paid-up share capital and general reserves, no further deduction is permitted.

Eligible Assessees

The following entities may claim the deduction:

• Banking companies, co-operative banks and public financial institutions engaged in providing long-term finance for industrial or agricultural development, infrastructure facilities, or housing in India;
• Housing finance companies providing long-term finance for construction or purchase of residential houses;
• Other financial corporations providing long-term finance for development of infrastructure facilities in India.

Amount of Deduction

The deduction allowable is the lower of:

• Amount transferred to the special reserve during the previous year;
• 20% of profits derived from the eligible business;
• 200% of paid-up share capital and general reserves as on the last day of the previous year, reduced by the opening balance of the special reserve.

No deduction is permitted once the special reserve exceeds 200% of paid-up share capital and general reserves.

Consequences of Withdrawal

Any withdrawal from the special reserve is taxable in the year of withdrawal to the extent deduction was previously allowed. Taxability applies irrespective of whether the business is in existence during that year.

Business losses of the year in which business was discontinued may be set off, even after expiry of eight years, against income deemed as business income under this provision.

Meaning of Key Terms

Long-term finance

Loans or advances repayable, along with interest, over a period of at least five years.

Infrastructure facility

Includes roads, bridges, rail systems, highways and related activities, water supply and treatment systems, irrigation systems, sanitation and sewerage systems, solid waste management, ports, airports, inland waterways and similar public facilities as may be prescribed.

Conditions for Notification as Infrastructure Facility

A public facility must satisfy the following:

• It is owned by an Indian company, a consortium of such companies, or a statutory body;
• It is covered by an agreement with the Central or State Government or a local/statutory authority for developing, operating or maintaining a new infrastructure facility;
• It begins operations on or after 1 April 1995.

Deduction for Deficiency in Case of Trade, Professional, or Similar Associations

Trade, professional, or similar associations may claim a deduction for deficiencies incurred. This deduction is limited to 50% of the total income computed before allowing such deduction. No carry forward of unutilized deficiencies is permitted.

Doctrine of Mutuality

The doctrine of mutuality holds that no person can profit from transactions with themselves. Income derived by associations from general services to members is exempt if there is complete identity between contributors and beneficiaries of the surplus. However, exceptions to this rule include:

• Income from specific services performed for members (taxed as business income).
• Profits from insurance businesses computed per Section 44.

Applicability of Deduction

Eligible Entities:

• Trade, professional, or similar associations receiving amounts from members by subscription or otherwise (excluding remuneration for specific services).
• Associations that do not distribute income to members, except as grants to affiliated associations.

Ineligible Entities:

• Associations under Section 10(23A), such as those controlling or encouraging specific professions like law, medicine, accounting, material management, town planning, etc.

Conditions for Relief:

• The deficiency must result from excess expenditure for protecting or advancing members’ common interests.

Quantum of Deduction

Calculation:

• Income from members (excluding remuneration for specific services).
• Less: Expenditure for common interests (excluding capital expenditure and deductions under other sections).
• The deficiency is deductible from income under “Profits and Gains of Business or Profession (PGBP)” first and then against income under other heads.

Limit:

• Deduction is capped at 50% of the total income before this deduction.

General Deductions & Disallowances

Other Deductions

Introduction

Section 36 allows deductions for various revenue expenses incurred during business or professional operations, provided specific conditions are met.

List of Key Deductions

1. Insurance Premium [Section 36(1)(i)/(ia)/(ib)]: For damage or destruction of stock or stores, on the life of cattle (paid by the federal milk co-operative society), or employees’ health (paid by other than cash).

2. Bonus or Commission [Section 36(1)(ii)]: Paid to employees if it would not otherwise have been payable to them as profit or dividend.

3. Interest on Borrowed Capital [Section 36(1)(iii)]: Interest on borrowings taken for operational activities or to acquire an asset, pertaining to the period after such asset is put to use, shall be allowed.

4. Discount on Zero-Coupon Bonds [Section 36(1)(iiia)]: Deductible on a pro-rata basis (refer to Rule 8C) over the bond’s life. Discount on zero-coupon bonds = Amount payable on maturity/redemption – Money realised on issue.

5. Employer Contributions [Section 36(1)(iv)/(iva)/(v)]:

• Employer’s contribution to PF or superannuation fund is deductible, but limited to 27% of the employee’s salary.
• Employer’s NPS contribution is deductible, restricted to the lower of actual contribution or 14% of employee’s salary.
• Employer’s contribution to an approved gratuity fund (irrevocable trust) is deductible, subject to:
• Annual contribution ≤ 8.33% of each employee’s salary, and
• Initial contribution for past service is ≤ 8.33% of salary per year of past service.

6. Employees’ Contributions [Section 36(1)(va)]: Employee contributions (PF/ESI) received by the employer are treated as the employer’s income, but a deduction is allowed only if deposited in the respective fund by the statutory due date of the relevant fund.

7. Loss of Animals [Section 36(1)(vi)]: For animals (other than as stock-in-trade) used in business, deductible upon death or permanent disability. Deductible amount = Actual cost of animals – Amount realised from carcasses or sale.

8. Bad Debts [Section 36(1)(vii)]: Deductible in the year in which written off as irrecoverable in the accounts.

• For the assessee to which Section 36(1)(viia) applies, deduction for bad debts is allowed only to the extent it exceeds the credit balance in the provision for bad and doubtful debts account made.
• If a debt, not recorded in the accounts due to any ICDS, becomes irrecoverable, it will be allowed as a deduction in that year, and it shall be deemed that such debt has been written off as irrecoverable in the accounts.
• The debt must have been included in the total income of the assessee or represent money lent in the ordinary course of banking or money-lending.
• In case of partial recovery, deficiency is deductible in the year of final settlement.

9. Provision for Bad Debts [Section 36(1)(viia)]: Allowed for banks, financial institutions and NBFCs. Deductible amount = Lower of provision made by assessee or % of total income/% of average rural advances (for banks).

10. Transfer to Special Reserve [Section 36(1)(viii)]: Allowed for banks, housing finance companies and financial institutions up to 20% of eligible business profits. No further deduction is allowed if the amount of such reserve exceeds 200% of the paid-up share capital and general reserves.

11. Family Planning Expenses [Section 36(1)(ix)]:

• Revenue expenditure: incurred by a company on promoting family planning among employees is deductible in the year of incurrence.
• Capital expenditure: Deductible in five equal instalments commencing from the year in which such expenditure is incurred. 1/5th of capital expenditure is deductible to the extent of business profits; the unabsorbed amount is carried forward like depreciation.
• If a family planning asset is sold without use for any other purposes, taxable business income = lower of (a) sale proceeds, or (b) deduction already claimed.
• If a family planning asset is later used for other business purposes, its depreciation cost = actual cost – deduction already claimed under this provision.

12. Revenue Expenditure by Statutory Corporations [Section 36(1)(xii)]: Revenue expenditure incurred by a notified statutory entity for purposes authorised by its Act is fully deductible.

13. Banking Cash Transaction Tax [Section 36(1)(xiii)]: Any Banking Cash Transaction Tax paid by the assessee on taxable banking transactions is allowable as a deduction.

14. Credit Guarantee Trust Fund Contributions [Section 36(1)(xiv)]: A public financial institution can claim a deduction for contributions made to a notified Credit Guarantee Fund Trust for Small Industries.

15. Securities/Commodities Transaction Tax [Section 36(1)(xv)/(xvi)]: STT/CTT paid on taxable securities/commodities transactions is deductible if such income is included under “Profits and gains of business or profession”.

16. Purchase of Sugarcane [Section 36(1)(xvii)]: A sugar manufacturing co-operative society can claim a deduction for sugarcane purchase, limited to the lower of the actual purchase price or the Government-fixed/approved price.

17. Marked-to-Market Loss [Section 36(1)(xviii)]: As per ICDS-VIII, listed securities held as stock-in-trade are valued at the lower of cost or NRV; any resulting loss is deductible.

General Deductions for Business Expenditures

Introduction

Section 37 provides a residual deduction for revenue expenditures incurred wholly and exclusively for business or profession, not covered under Sections 30 to 36, and not prohibited by law.

Conditions for Allowability

• Not Covered by Sections 30 to 36.
• Not a Capital or Personal Expenditure:
  • Capital expenditures are non-deductible unless specified otherwise.
  • Personal expenses are excluded.
• Wholly and Exclusively for Business:
  • Expenditure must serve a commercial purpose, determined from a business perspective.

Specifically Disallowed Expenditures

• Expenditure for any offence or activity prohibited by law, which includes expenditures:
• For any purpose that is an offence or prohibited by law, in India or outside India.
• On providing any benefit/perquisite that violates any law, rules, regulations or guidelines governing the recipient.
• To compound an offence under any law, in India or outside India.
• To settle proceedings for contravention of any law notified by the Central Government. The following laws are notified: [Notification No. 38/2025, dated 23-04-2025]
• Securities and Exchange Board of India Act, 1992;
• Securities Contracts (Regulation) Act, 1956;
• Depositories Act, 1996;
• Competition Act, 2002.
• Expenditure incurred on advertisement in any souvenir, brochure, tract, pamphlet or similar material published by a political party.

Disallowance of Expenses

Introduction

Certain expenses are disallowed, wholly or partly, while computing taxable income if specific conditions are not met.

Disallowance Categories

Default in payment of TDS [Section 40(a)(i)/(ia)/(iii)]

• Payment outside India or in India to non-residents, for expenses like interest, royalty, FTS, etc., for which TDS was not deducted or deducted but not deposited by the due date of return filing. 100% of the expenditure is disallowed. Such expenditure is deductible in the year in which tax is deducted and deposited or deposited with the Central Government.
• Payment to residents for which TDS was not deducted or deducted but not deposited by the due date of return filing. 30% of the expenditure is disallowed. Such expenditure is deductible in the year in which tax is deducted and deposited or deposited with the Central Government.
• Salary paid outside India or in India to a non-resident for which TDS was not deducted or deducted but not deposited. 100% of the expenditure is disallowed.
• If the payer has not deducted TDS fully or partly, but is not treated as assessee-in-defaultbecause:
  • The payee has included the above income in his return of income.
  • He has paid the tax due on the income declared in such return of income, and
  • The payer obtains a certificate to this effect from a Chartered Accountant in Form No. 26A and submits it electronically,

then it will be assumed that the payer has deducted and paid the TDS on the date when the payee filed their return of income.

Default in payment of equalisation levy [Section 40(a)(ib)]

• Expenses for which the levy was not deducted or deducted but not deposited with the Government by the due date of return filing.
• Such expenditure is deductible in the year in which the levy is deducted and deposited.
• However, the equalisation levy shall not be charged on payments made on or after 01-04-2025.

Tax payment [Section 40(a)(ii)]

• Payment of income tax, surcharge, and education cess,
• Taxes paid outside India, which are eligible for relief under Sections 90, 90A or 91.

Royalty or license fee levied on the State Govt. undertaking [Section 40(a)(iib)]

• Any payment by way of royalty, licence fee, service fee, privilege fee, service charges, or any other fee/charges levied exclusively on or any amount appropriated from a State Govt. undertaking by the State Govt.

Employer’s contribution to PF [Section 40(a)(iv)]

• Employer’s contribution to PF or other employee funds if no proper TDS arrangement is made under Section 192A (or other relevant section) on taxable payments made from the fund, which are taxable as salary.

Tax paid on non-monetary perquisites [Section 40(a)(v)]

• Taxes paid by the employer on non-monetary perquisites provided to its employees.

Payment made to the partners [Sections 40(b)]

• Remuneration payment (such as salary, bonus, commission, or remuneration) made to partners by a partnership firm is deductible only if authorised by the partnership deed and paid to the working partner, subject to the following:
  • Interest on capital is deductible only up to 12% per annum. Interest payment in excess of 12% per annum shall be disallowed.
  • If a partner represents someone else, interest paid to him in his personal capacityis not hit by the 12% cap. Similarly, if he is a partner in his individual capacity, interest received on behalf of another person is outside Section 40(b). However, if the amount is excessive, it may still be disallowed under Section 40A(2).
  • Deduction for partner’s remuneration shall be limited to the following:
• In case of negative book profit (loss) – Rs. 3,00,000
• On the first Rs. 6,00,000 of book profit – Higher of Rs. 3,00,000 or 90% of book profit
• On balance of book profit – 60% of book profit
• Book Profit = Net Profit (including adjustments) + Remuneration already debited
• Interest paid in excess of 12% shall be added back while computing the book profit.

Payment made to the members of AOP/BOI [Sections 40(ba)]

• Payments by an AOP/BOI to its members as salary, bonus, commission, remuneration, or interest. For interest, only the net amount paid (after adjusting interest recovered) is disallowed.
• If a person is a member of an AOP/BOI as a representative of someone else, interest paid to him in his personal capacity won’t be disallowed. Likewise, if a person is a member in his personal capacity, interest paid to him on behalf of another person won’t be disallowed.

Payment made to related parties [Section 40A(2)]

• Expenditure paid to specified persons is disallowed to the extent it is excessive or unreasonable compared to the fair market value of goods/services/facilities, legitimate business needs, or benefit derived.
• Specified person means where the assessee is:
  • an individual
• Persons in whose business the individual or his relative has a substantial interest.
  • a HUF
• Family members, their relatives.
• Persons in whose business the HUF, its members, or their relatives have a substantial interest.
  • a Company
• Directors, relatives of directors.
• Persons in whose business the company, its directors, or their relatives have a substantial interest
  • a partnership firm
• Partners, relatives of partners.
• Persons in whose business the firm, its partners, or their relatives have a substantial interest.
  • an AOP/BOI
• Members, their relatives.
• Persons in whose business the AOP/BOI, its members, or their relatives have a substantial interest.
  • It also includes:
• an individual who has a substantial interest in the business of the assessee and a relative of such individual.
• a company which has a substantial interest in the business of the assessee, any director of such company, any relative of such director, and any other company in which such company has a substantial interest.
• a Firm, AOP, or HUF that has a substantial interest in the business of the assessee, partner or member of such person and any relative of such partner or member.
• a company, one of whose directors has a substantial interest in the business of the assessee, any director of such company and any relative of such director.
• a Firm or AOP or HUF, one of whose partners/members has a substantial interest in the business of the assessee, any partner or member of such person, and any relative of such partner or member.

• A person is deemed to have a substantial interest in the business or profession if such person is the beneficial owner of at least:
  • 20% shares (not being shares entitled to a fixed rate of dividend, whether with or without a right to participate in profits) at any time during the relevant previous year, if a business or profession is carried on by a company; and
  • 20% of profits at any time during the previous year, if the business or profession is carried on by any other person.

Payment made in cash [Section 40A(3)/(3A)]

• If payment or aggregate of payment to a person in a day exceeds 10,000 (Rs. 35,000 for goods carriages) and it is made other than by account payee cheque, bank draft, electronic clearing system, or prescribed electronic modes.
• If expenditure was claimed earlier and repaid in non-specified modes exceeding 10,000, it is treated as business income in the year of repayment.
• Disallowance is not made for the following payments: [ Rule 6DD ]
  • Payment to specified institutions like RBI, banks, LIC, co-operative banks, etc.
  • Payment for an expenditure which is required to be made to the Government in legal tender.
  • Payment by specified modes like letter of credit arrangement via bank, mail/telegraphic transfer via bank, book adjustment of bank accounts, bill of exchange payable to bank.
  • Payment is adjusted against the payee’s liability for goods or services provided by the assessee.
  • Payment made to cultivator, grower, or producer for purchase of agriculture or forest produce, produce of animal husbandry or dairy or poultry farming, fish or fish products, or products of horticulture or apiculture.
  • Payment made to a producer for the purchase of a product manufactured/processed without the aid of power in a cottage industry.
  • Payment made in a village/town without a banking facility, to a resident of such village/town or a person carrying on business/profession there.
  • Payment made to employees or their heirs by way of gratuity, retrenchment compensation, or similar terminal benefit if the aggregate of such sum does not exceed 50,000.
  • Salary paid (after TDS under Section 192) to an employee who is temporarily posted for ≥ 15 days at a place/ship other than normal duty and has no bank account at that place/ship.
  • Payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person.
  • Payment made by an authorised dealer or a money changer for the purchase of foreign currency or a traveller’s cheque in the normal course of his business.

Provision for gratuity [Section 40A(7)]

• Any provision made for gratuity payment to employees on their retirement or termination, except: provision made for payment of gratuity by way of contribution to an approved gratuity fund, or provision for payment of gratuity that has become payable during the previous year.
• If the provision of gratuity payment was already allowed earlier, no deduction will be allowed again on the actual payment out of such provision.

Contributions to non-statutory funds [Section 40A(9)]

• Any sum paid by an employer to create or contribution to any fund, trust, company, AOP, BOI, registered society, or other institution for any purpose, except where such sum is paid to a recognised PF, approved superannuation/pension scheme, or approved gratuity fund up to limits permitted under income-tax law or it is compulsory under any other law.

Marked-to-market loss [Section 40A(13)]

• Any marked-to-market loss or other expected loss except as allowed under Section 36(1)(xviii).

Disallowance for TDS Default

Introduction

Expenditure is disallowed if tax is not deducted or, after deduction, not deposited with the Central Government in accordance with Chapter XVII-B. Such expenditure is allowable in the year in which the tax is duly deducted and deposited.

Disallowance from Payment Made to Non-Resident [Section 40(a)(i)]

Disallowance applies where tax is not deducted or not deposited by the due date for filing the return in respect of payments, including interest, royalty, technical fees or any other sum (other than salary), payable outside India or in India to a non-resident or foreign company, where such sum is chargeable to tax in India.

If salary is paid outside India or to a non-resident and tax is not paid or deducted, disallowance is made under Section 40(a)(iii).

The provision applies where tax is not deducted under Sections 194B, 194BA, 194BB, 194E, 194G, 194LB, 194LBA, 194LBB, 194LBC, 194LC, 194LD, 194T, 195, 196A , 196B , 196C or 196D .

Amount disallowed: 100% of the expenditure.

Expenditure allowed subsequently:

• If disallowed for non-deduction, it is allowed in the year in which tax is deducted and deposited.
• If disallowed for late deposit, it is allowed in the year in which tax is deposited.

No disallowance is made where the deductee has filed return of income, included the amount in income, paid due tax, and the payer furnishes Form No. 26A electronically.

Disallowance from Payment Made to Resident [Section 40(a)(ia)]

Disallowance applies where tax is not deducted or not deposited from sums payable to a resident and where such expenditure is claimed under the head Profits and gains of business or profession or Income from other sources.

The provision applies where tax is not deducted under Sections 192, 193 , 194A , 194B , 194BA , 194BB , 194C , 194D , 194DA , 194EE , 194F , 194G , 194H , 194-I , 194-IA , 194-IB , 194-IC , 194J , 194K , 194LA , 194LBA , 194LBB , 194LBC , 194M , 194-O , 194P , 194Q , 194R , 194S or 194T .

Amount disallowed: 30% of the expenditure.

Exception: No disallowance if the deductee has filed return, included the income, paid tax, and the payer furnishes Form No. 26A electronically.

Expenditure allowed subsequently:

• If disallowed for non-deduction, it is allowed in the year in which tax is deducted and deposited.
• If disallowed for late deposit, it is allowed in the year in which tax is deposited.

Disallowance from Payment of Salary to Non-Resident [Section 40(a)(iii)]

Salary payable outside India to any person or salary payable in India to a non-resident is not allowable as deduction if tax has not been paid or deducted. If the assessee deposits the tax on such salary, no disallowance arises under this section, though tax paid by the assessee is disallowed under Section 40(a)(ii).

If tax is not deducted from salary paid in India to a resident, disallowance is governed by Section 40(a)(ia).

Disallowance of payment made to related persons

Introduction

Excessive payment made or is to be made to the related parties in respect of an expenditure shall be disallowed to the extent such expenditure is considered excessive or unreasonable. The object of this provision is to check evasion of tax through excessive or unreasonable payments to relatives and other specified persons.

When disallowance is made?

Where assessee incurs any expenditure, in respect of which payment has been or is to be made to the specified persons, it shall be disallowed to the extent it is considered excessive or unreasonable having regard to the following:

• Fair market value of goods, or services or facilities
• Legitimate needs of the business of the assessee
• Benefit derived by or accruing to assessee as a result of the expenditure.

The onus is on the Assessing Officer to bring the material on record to prove that the payment made by the assessee is excessive or unreasonable having regard to the criterion referred to above.

Exception

No expenditure in a transaction, being a specified domestic transaction incurred for an assessment year commencing on or before April 01, 2016, shall be disallowed by treating it as excessive or unreasonable having regard to its fair market value, if it is at its arm length price as defined under section 92F (ii).

However, expenditure shall be disallowed for any transaction made on or after the assessment year 2017-18, if it is deemed as excessive or unreasonable having regard to its fair market value, even if it is at its arm’s length price as defined under section 92F (ii).

Specified Persons

The specified persons for various types of assessee are discussed as below:

Who has incurred the expenditure?	Specified persons to whom payment has been made
1. An Individual	a) Any relative of such individual b) To a person in whose business the individual or any of his relative has a substantial interest
2. A Company	a) Director of the Company b) Any relative of the director c) To a person in whose business the company or any of its directors or relative of such directors has a substantial interest.
3. A Firm	a) Partner of the firm b) Any relative of the partner c) To a person in whose business the firm or any of its partners or relative of such partners has a substantial interest.
4. AOP/BOI	a) Members of the AOP/BOI b) Any relative of the members c) To a person in whose business the AOP/BOI or any of its members or relative of such members has a substantial interest.
5. A HUF	a) To a member of the family b) Any relative of the members c) To a person in whose business the HUF or any of its members or relative of such members has a substantial interest.
6. Any other taxpayer	a) To an individual who has a substantial interest in business of taxpayer b) Any relative of such individual
7. Any other taxpayer	a) To a company which has a substantial interest in the business of the taxpayer b) Any director of such company c) Any relative of such director d) Any other company carrying on business or profession in which above mentioned company has a substantial interest
8. Any other taxpayer	a) To a Firm or AOP or HUF who has substantial interest in the business of the taxpayer b) Partner or member of such person c) Any relative of such partner or member
9. Any other taxpayer	a) To a company, one of whose directors has a substantial interest in the business of the taxpayer b) Any director of such company c) Any relative of such director
10. Any other taxpayer	a) To a Firm or AOP or HUF, one of whose partners/members has a substantial interest in the business of the taxpayer b) Any partner or member of such person c) Any relative of such partner or member

Meaning of ‘Relative’

The term ‘relative’ in relation to an individual shall include husband, wife, brother or sister or any lineal ascendant or descendant of that individual.

Meaning of ‘Substantial Interest’

A person is deemed to have substantial interest in the business or profession if such person is the beneficial owner of at least:

• 20% share (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) at any time during the relevant previous year, if business or profession is carried on by a company
• 20% of profits at any time during the previous year, if business or profession is carried on by any other concern.

Disallowance of Cash Payments

Introduction

No deduction is allowed for any expenditure if payment exceeding Rs. 10,000 per day is made otherwise than by account payee cheque, account payee bank draft, electronic clearing system through a bank account, or prescribed electronic modes. For payments relating to plying, hiring or leasing goods carriages, the limit is Rs. 35,000. Certain exceptions are provided under Rule 6DD.

When Disallowance Is Made

Disallowance applies where:

• Payment or aggregate payments to a person in a day exceed Rs. 10,000 (or Rs. 35,000 for specified transport-related payments), and
• Payment is not made through permissible banking modes or prescribed electronic modes.

The disallowance operates only when both the expenditure and the payment exceed Rs. 10,000 in a day. Payments made through prescribed electronic modes are acceptable.

Loan repayments are not considered expenditure and are therefore not subject to disallowance, though repayment is subject to Section 269ST. Interest payments are covered by this disallowance provision.

Payments made by commission agents for goods sold on commission are not covered, but purchases on the agent’s own account are subject to these rules.

If an expenditure was allowed in an earlier year but later paid in cash exceeding the limit, the amount so paid is deemed business income in the year of payment. For transport-related businesses, the Rs. 35,000 limit applies.

Exceptions under Rule 6DD

Disallowance does not apply in the following cases:

Payment to specified institutions:

Payments to RBI, banking companies, SBI and subsidiaries, co-operative banks, land mortgage banks, Primary Agricultural Credit or Credit Societies, and LIC.

Payment to Government in legal tender:

Where payment must be made in legal tender.

Payments through specified modes:

Letter of credit, mail or telegraphic transfer, book adjustments between bank accounts, bill of exchange payable only to a bank, electronic clearing systems, and prescribed electronic modes. Bank includes foreign banks.

Payment by book adjustment:

Adjustment against liability for goods or services supplied by the assessee.

Payments for agricultural or animal produce:

Payments to cultivators, growers, or producers of agricultural produce, forest produce, produce of animal husbandry, dairy, poultry, fish or fish products, or products of horticulture or apiculture.
This applies only if payment is made to the actual producer and not to intermediaries.

Purchase of animals:

Payments to producers of livestock and meat are exempt subject to conditions including producer declarations and certification by a veterinary doctor.

Cottage industry products:

Payments to producers manufacturing or processing products without power in a cottage industry.

Terminal benefits to low-paid employees:

Payments of gratuity, retrenchment compensation or similar terminal benefits up to Rs. 50,000.

Salary at remote places:

Where salary is paid after TDS to an employee temporarily posted for at least 15 days at a place or ship where no bank account is maintained.

Authorized dealers and money changers:

Cash payments for purchase of foreign currency or traveller’s cheques in the ordinary course of business.

No dispute permitted:

Where payment is made through prescribed modes to avoid disallowance, no person may claim in any proceeding that payment was not made in cash or otherwise.

Deduction for Partner’s Remuneration

Introduction

A firm may claim deduction for remuneration or interest paid to its partners if such payments are authorised by the partnership deed, made only to working partners in case of remuneration, and within the statutory limits prescribed under Section 40(b).

When Deduction Is Allowed

Remuneration paid to working partners in the form of salary, bonus, commission or any other form is allowable as deduction only when:

• The partnership deed authorises such payment;
• The partner is a working partner, meaning an individual actively engaged in the conduct of business; and
• The amount does not exceed the limits prescribed under Section 40(b).

Remuneration to non-working partners is not allowable. The firm must demonstrate that the partner qualifies as a working partner.

Interest paid to partners is deductible only if authorised by the partnership deed and not exceeding 12% per annum. Any amendment to the deed has only prospective effect.

The partnership deed must specify the amount of remuneration or the method of quantifying it. If neither the amount nor the quantification mechanism is specified, remuneration cannot be allowed as deduction.

How Much Deduction Is Allowed

In case of remuneration

Deduction is restricted to the amount authorised in the partnership deed or the limits of Section 40(b), whichever is lower.

For assessment years up to 2024–25:

• Negative book profit: Rs. 1,50,000
• First Rs. 3,00,000 of book profit: Higher of Rs. 1,50,000 or 90% of book profit
• Balance book profit: 60% of such balance

From assessment year 2025–26:

• Negative book profit: Rs. 3,00,000
• First Rs. 6,00,000 of book profit: Higher of Rs. 3,00,000 or 90% of book profit
• Balance book profit: 60% of such balance

Book profit is computed by adjusting net profit for provisions under Sections 28 to 44DB and adding back partners’ remuneration debited to the profit and loss account. Unabsorbed depreciation is adjusted but brought-forward losses are not. Income chargeable under other heads is excluded. Interest exceeding 12% is added back. Deductions under Chapter VI-A are ignored.

In case of interest

Interest paid on partners’ capital is deductible only if authorised by the partnership deed and not exceeding 12% per annum. Interest in excess of this limit is disallowed. Interest paid to a partner in a representative capacity is treated based on whether it is received personally or on behalf of another person. Excessive interest may still be disallowed under Section 40A(2).

When Deduction Is Not Allowed

Deduction for remuneration or interest is not allowed if:

• The partnership deed does not specify the profit-sharing ratio;
• The firm fails to file the return, comply with notices under Sections 142(1) or 143(2), or comply with directions issued under Section 142(2A);
• Circumstances under Section 144 apply.
  Disallowance arises only in situations governed by Section 144.

Excessive Remuneration

If remuneration paid to partners is excessive or unreasonable having regard to fair market value, legitimate business needs or benefit derived, such amount may be disallowed under Section 40A(2).

Disallowance of Sum Paid to Members of AOP or BOI

Introduction
An Association of Persons (AOP) or Body of Individuals (BOI) is not allowed deduction for any salary, bonus, commission, remuneration or interest paid to its members. Other payments made to members, such as rent or consultancy fees, are allowable.

Disallowance for Remuneration and Interest

Any amount paid by an AOP or BOI to its members in the form of salary, bonus, commission, remuneration or interest is not allowable as deduction.

Exception: Member in Representative Capacity

If an individual is a member in an AOP or BOI on behalf of another person, interest paid to such member otherwise than in a representative capacity shall not be disallowed under this provision.
Similarly, where an individual is a member in a personal capacity, interest received on behalf of another person is not considered for disallowance.

Deduction Allowed for Other Payments

Payments made to members that are not in the nature of salary, bonus, commission, remuneration or interest are allowable as deduction.

Presumptive Taxation Regime

Presumptive Taxation Schemes

Under presumptive taxation schemes, taxpayers can compute their taxable income as a percentage of turnover, gross receipts, or specified amounts without maintaining detailed books of accounts. The schemes are available for both resident and non-resident assessees, covering specific businesses and professions.

Presumptive Schemes for Residents

Section 44AD: Businesses

• Eligible Assessee: Resident individuals, HUFs, and partnership firms (excluding LLPs).
• Eligible Business: All except agency or commission businesses.
• Income Presumption:
  • 8% of turnover (6% if received through banking channels).
• Opting Out:
  • Mandatory maintenance of books of accounts and audit.
  • Cannot re-opt for 5 years.

Section 44ADA: Professions

• Eligible Assessee: Resident individuals and partnership firms (excluding LLPs).
• Eligible Professions: Specified professions like legal, medical, engineering, etc.
• Income Presumption :50% of gross receipts.
• Opting Out:
  • Mandatory maintenance of books of accounts and audit.

Section 44AE: Goods Transport

• Eligible Assessee: Any resident or non-resident.
• Eligible Business: Plying, hiring, or leasing goods carriages.
• Income Presumption:
  • Heavy vehicle: ₹1,000 per ton of gross vehicle weight.
  • Other vehicles: ₹7,500 per month or part thereof.

Presumptive Schemes for Non-Residents

Section 44AE:Same provisions as for residents (goods transport).

Section 44B: Shipping Business

Income Presumption:5% of gross receipts.

Section 44BB: Mineral Oil Exploration

Income Presumption:10% of gross receipts.

Audit: Books must be maintained if opted out.

Section 44BBA: Airlines

Income Presumption:5% of gross receipts.

Section 44BBB: Turnkey Power Projects

Eligible Assessee: Foreign companies engaged in civil construction for power projects.

Income Presumption:10% of gross receipts.

Audit: Books must be maintained if opted out.

Section 44BBC: Cruise Shipping

Income Presumption:20% of gross receipts.

Section 44BBD: Electronics manufacturing support in India

Income Presumption:25% of gross receipts.

Presumptive Taxation Scheme for Businesses Under Section 44AD

Section 44AD of the Income-tax Act, 1961, provides a simplified presumptive taxation scheme for eligible businesses. Under this scheme, the taxable income is calculated on a presumptive basis at prescribed rates, eliminating the need for maintaining detailed books of accounts. It applies to eligible resident individuals, HUFs, and partnership firms (excluding LLPs) whose gross receipts or turnover does not exceed specified thresholds.

Key Provisions

Eligibility:

Applicable to resident individuals, HUFs, and partnership firms (excluding LLPs).

Businesses with turnover up to 2 crores, extendable to Rs. 3 crores if cash receipts are ≤5% of total turnover or gross receipts.

Exclusions:

Non-residents, LLPs, companies, and specified entities like trusts and cooperative societies.

Income from agency businesses, commission/brokerage, or professions specified under Section 44AA.

Speculative businesses are also excluded as per return filing instructions.

Presumptive Income Rates:

8%of turnover for cash receipts.

6%for receipts through digital modes, account payee cheques, or bank drafts.

Restriction on Lower Income Declaration:

If income is declared lower than the presumptive rate in any of the next 5 years, the taxpayer becomes ineligible for the scheme for the subsequent five years and must maintain books of accounts as per Section 44AA.

Benefits and Limitations

Exemption from Maintenance of Books and Audit:

Taxpayers under this scheme are exempted from maintaining books of accounts and audit requirements under Sections 44AA and 44AB.

No Deduction for Business Expenses:

All eligible expenses under Sections 30 to 38 are deemed to have been allowed.

No separate deduction for partner remuneration or interest under Section 40(b).

Advance Tax Payment:

Advance tax is payable in a single installment by March 15, unlike quarterly installments for other taxpayers.

Special Provisions

Threshold of Turnover for Cash and Non-Cash Receipts:

• Turnover limit increases from 2 crores to Rs. 3 crores if cash transactions remain ≤5% of total turnover.

Depreciation:

• Depreciation is deemed to have been allowed, and the written-down value (WDV) of assets is adjusted accordingly.

Restrictions on Chapter VI-A Deductions:

• Deductions under Sections 30 to 38 are allowed, but deductions under Part-C of Chapter VI-A are not applicable.

Presumptive Taxation Scheme for Professionals under Section 44ADA

Section 44ADA of the Income-tax Act, 1961, provides a simplified presumptive taxation scheme for specified professionals. It allows eligible taxpayers to calculate taxable income on a presumptive basis, reducing compliance requirements. This scheme is applicable if gross receipts from the profession do not exceed Rs. 50 lakhs or Rs. 75 lakhs under specified conditions.

Key Provisions

Eligibility:

Applicable to resident individuals and partnership firms (excluding LLPs).

Gross receipts should not exceed 50 lakhs, extendable to Rs. 75 lakhs if cash receipts are ≤5% of total receipts.

Cash receipts include payments through non-account payee cheques or drafts.

Eligible Professions:

Legal, medical, engineering, architectural, and accountancy.

Technical consultancy, interior decoration, information technology, company secretary, authorized representatives, and film artists.

Other professions are excluded.

Presumptive Income Rate:

Presumed income is 50%of gross receipts.

Lower Income Declaration

• Taxpayers can declare income lower than 50% of gross receipts.
• However, if total income exceeds the basic exemption limit, they must maintain books of accounts as per Section 44AA and have them audited under Section 44AB.

Benefits and Limitations

Simplified Compliance:

No requirement to maintain books of accounts or undergo audits if income is calculated on a presumptive basis.

No Deduction for Expenses:

All allowable expenses under Sections 30 to 38 are deemed allowed.

No additional deduction for partner remuneration or interest as per Section 40(b).

Depreciation is deemed to have been allowed, and WDV of assets is adjusted accordingly.

Advance Tax:

Entire advance tax is payable by March 15 of the financial year.

Exemptions and Special Provisions

• Exemption from disallowance of expenses under Sections 40, 40A , and 43B .
• Deductions under Chapter VI-A are permissible

Presumptive Taxation Scheme for Transporters Under Section 44AE

Section 44AE of the Income-tax Act, 1961, provides a presumptive taxation scheme for small transporters engaged in the business of plying, hiring, or leasing goods carriages. The scheme simplifies compliance by allowing taxable income to be calculated on a presumptive basis, provided the taxpayer does not own more than 10 goods vehicles during the financial year.

Key Provisions

Eligibility:

• Applicable to any taxpayer engaged in the goods transportation business.
• Ownership of goods vehicles should not exceed 10 at any time during the year.
• Vehicles on hire-purchase or installment payments are considered owned by the taxpayer.

Presumptive Income Rates:

• Heavy Goods Vehicles (gross vehicle weight > 12,000 kg): 1,000 per ton of gross or unladen weight per month or part thereof.
• Other Goods Vehicles (gross vehicle weight ≤ 12,000 kg): 7,500 per vehicle per month or part thereof.

Flexibility to Declare Higher Income:

Taxpayers may voluntarily declare income higher than the presumptive rate.

Lower Income Declaration

• Taxpayers can declare income lower than the presumptive income. However, if total income exceeds the basic exemption limit, they must:

• • Maintain books of accounts as per Section 44AA.
  • Get the accounts audited under Section 44AB.

Benefits and Limitations

Exemption from Maintenance of Books and Audit:

• Taxpayers opting for the scheme are exempt from maintaining detailed accounts and audits under Sections 44AA and 44AB.

No Deduction for Business Expenses:

• Deductions under Sections 30 to 38 are deemed to have been allowed.
• Depreciation is deemed to have been claimed, and the WDV of assets is adjusted accordingly.

Advance Tax Compliance:

• Unlike taxpayers under Sections 44AD or 44ADA, transporters must pay advance tax in four installments.

Additional Requirements

Expense Disallowance:

• No disallowance is made under Sections 40, 40A , or 43B as all expenses are presumed to be allowed.

Presumptive Scheme for Shipping Business under Sections 44B and 172

Non-residents operating ships may opt for presumptive taxation under Sections 44B or 172. Taxable income is presumed at 7.5% of specified receipts from the carriage of goods, passengers, livestock, or mail.

Presumptive Scheme under Section 44B

Applicability: Non-resident individuals or foreign companies engaged in shipping (excluding cruise ships).

Presumptive Income:

• 5% of the total receipts for:
  • Carriage of passengers, livestock or goods at Indian ports.
  • Amounts received in India for shipping activities at foreign ports.
  • Demurrage, handling, or similar charges.

Overrides Other Provisions: Income is computed without reference to Sections 28 to 43A, but deductions under Chapter VI-A are available.

Double Taxation Avoidance Agreements (DTAAs):

• If a DTAA assigns taxation rights exclusively to the resident country, no tax is payable in India. A “No Objection Certificate” must be obtained.

Presumptive Scheme under Section 172

• Applicability: Tax levy and recovery for individual voyages of ships owned or chartered by non-residents, departing from Indian ports.
• Presumptive Income: 7.5% of amounts paid or payable for carriage of passengers, goods, livestock, or mail at Indian ports.

Return Filing by Shipmaster:

• Must file a return before departure, including all charges received.
• Authorised persons may file if arrangements are made.

Assessment by Tax Authority:

• Tax is calculated at foreign company rates.
• Assessment must be completed within nine months of the financial year-end.

Port Clearance Certificate:

• Issued only after verifying tax payment or satisfactory arrangements.

Option for Regular Assessment:

• Owners or charterers may opt for regular assessment before the assessment year’s end.
• Tax paid under Section 172 is treated as advance tax. Refunds or additional payments are adjusted accordingly.
• Interest under Sections 234B and 234C or refunds under Section 244A may apply.

Presumptive Scheme for Cruise Shipping Business under Section 44BBC

Section 44BBC provides a presumptive taxation scheme for non-resident entities operating cruise ships. Under this scheme, 20% of the total receipts from the carriage of passengers is deemed to be taxable income, effective from Assessment Year 2025-26.

Key Features

Objective: To promote India as a global cruise tourism hub by offering a predictable tax structure for international operators.

Eligible Entities: Non-residents and foreign companies operating cruise ships. Entities with Place of Effective Management (POEM) in India are excluded.

Scope:

Domestic Traffic: Cruise operations exclusively between Indian ports.

International Traffic: Operations between Indian and foreign ports or solely foreign ports fall under Section 44B or Section 172.

Effective Date: Applies to income earned on or after April 1, 2024.

Nature of Scheme:

20% of the sum received or receivable by the shipping entity from the carriage of passengers.

Computation of Income

Taxable Income:

220% of the total amount received or receivable by, or paid or payable to, a non-resident cruise ship operator for carriage of passengers is deemed to be the profits and gains from that business.

Override Provisions:

Overrides Sections 28 to 43A. Other provisions, including those for capital gains and loss set-off, remain applicable.

Exemptions and Deductions

• Lease Rentals: Rentals from leasing cruise ships are exempt under Section 10(15B) if both lessor and lessee are subsidiaries of the same holding company.
• Chapter VI-A Deductions: Permitted alongside presumptive taxation.

Presumptive Scheme for Exploration Business under Section 44BB

Section 44BB provides a presumptive taxation scheme for non-residents engaged in providing services, facilities, or hiring out plant and machinery for activities related to the exploration, extraction, or production of mineral oils. Taxable income is deemed to be 10% of the gross receipts.

Key Features

Objective: Simplify tax compliance for non-resident entities in the mineral oil exploration sector by offering a presumptive tax mechanism.

Eligibility:

• Non-residents providing services or facilities related to mineral oil exploration or production.
• Non-residents supplying or hiring out plant and machinery for the same purpose.

Definitions:

• Mineral Oil: Includes petroleum and natural gas.
• Plant: Covers ships, aircraft, vehicles, drilling units, scientific apparatus, and equipment used in the specified activities.

Exclusions:

• Income covered under Section 42 (special provisions for mineral oil businesses).
• Income classified as royalties or technical fees under Sections 44D, 44DA , or 115A .
• Other specified circumstances under Section 293A.

Computation of Presumptive Income

Taxable Income: 10% of the total receipts, including:

• Payments for services, facilities, or machinery hire related to mineral oil operations in India or abroad.
• Amounts received directly or through agents, whether in India or overseas.

Provisions and Implications

Option to Declare Lower Income:

• Permitted, but requires maintaining books of account (Section 44AA) and undergoing a tax audit (Section 44AB).
• Subject to scrutiny under Section 143(3).

Non-adjustability of Certain Losses:

• Business losses and unabsorbed depreciation from previous years cannot be set off against presumptive income.
• Losses can be carried forward to future years when the presumptive scheme is not opted for, with the carry-forward period reduced accordingly.

Overrides:

• Overrides Sections 28 to 43A for computing business income.
• Provisions for capital gains, set-off or carry forward of losses, etc., remain applicable.

Deductions:

• Chapter VI-A deductions are available as the scheme overrides only Sections 28 to 43A.

Presumptive Scheme for Airline Companies under Section 44BBA

Section 44BBA provides a presumptive taxation scheme for non-residents operating aircraft. Taxable income is deemed to be 5% of specified receipts, simplifying compliance for airline operators.

Key Features

Objective: To reduce the compliance burden for non-residents engaged in the airline business by allowing taxation on a presumptive basis.

Eligibility:

• Non-residents engaged in the business of operating aircraft.

Computation of Presumptive Income

• Taxable Income: 5% of the aggregate of:

1. Amounts paid or payable for carriage of passengers, goods, mail, or livestock from any location in India (whether paid in India or abroad, directly or through an agent).

2. Amounts received or deemed to be received in India for carriage from foreign locations.

Provisions and Deductions

Overrides Sections 28 to 43A:

• Income is computed on a presumptive basis, and no further deductions or additions under Sections 28 to 43A are allowed.

Chapter VI-A Deductions:

• Deductions under Chapter VI-A are permissible, as this section overrides only Sections 28 to 43A.

Presumptive Scheme for Civil Construction Companies under Section 44BBB

Section 44BBB of the Income-tax Act allows foreign companies engaged in civil construction or related activities to compute income on a presumptive basis. This simplifies compliance by requiring tax to be calculated at 10% of amounts received in connection with specified turnkey power projects.

Key Features of the Scheme

Eligibility: Available to foreign companies undertaking civil construction, erection, testing, or commissioning related to turnkey power projects approved by the Central Government. Approvals are issued by the Department of Power, Ministry of Energy.

Presumptive Income: Taxable income is deemed to be 10% of the sum received or receivable, regardless of whether payments are made in or outside India.

Option to Declare Lower Income

• Assessees can declare income lower than the presumptive rate, but must maintain books of account under Section 44AA and undergo an audit under Section 44AB. Scrutiny assessment under Section 143(3) is mandatory in such cases.

Treatment of Losses and Depreciation

• No Set-off: Unabsorbed depreciation and brought forward business losses cannot be set off against presumptive income.
• Carry Forward: Business losses from earlier years can be carried forward but are reduced by the number of years the presumptive scheme is opted for.

Override of Other Provisions

• Section 44BBB overrides Sections 28 to 44AA, deeming all additions and deductions under these sections to be allowed.

Deductions under Chapter VI-A

• Deductions under Chapter VI-A can be claimed even if the presumptive scheme is opted for, as Section 44BBB does not override these provisions.

Special Businesses, Non-Residents & Compliance

Taxation of Banks or Financial Institutions: Interest on Bad or Doubtful Debts

Interest income on specified categories of bad or doubtful debts for public financial institutions, scheduled banks, and certain other entities is taxable in the year of receipt or credit to the profit and loss account, whichever is earlier.

Entities Covered

This provision applies to:

• Public financial institutions
• Scheduled banks
• Cooperative banks (excluding primary agricultural credit societies and primary cooperative agricultural and rural development banks)
• State financial corporations
• State industrial investment corporations
• Non-banking financial companies (NBFCs) as notified by the Central Government

Bad and Doubtful Debts (Rule 6EA)

Interest income relating to the following categories of bad and doubtful debts qualifies for this provision:

Non-viable and sticky advances:

• Accounts overdrawn beyond limits for six months or more.
• Overdue instalments, import bills, or deferred payment instalments for defined periods.
• Bills up to 10–15% of the borrower’s outstanding are overdue for under 3 months, with no immediate refund for unpaid bills.
• Accounts showing signs of stagnation, financial distress, or mismanagement.
  • Advances recalled: Where repayment is highly doubtful, and revival is deemed unfeasible.
  • Suit-filed accounts: Advances under legal or recovery proceedings.
  • Decreed debts: Cases where a decree has been obtained but remains unexecuted.
  • Irrecoverable debts: Loans with diminished security value or borrower unwillingness/inability to repay.

Key Provisions

• Section 43D provides for taxation of interest on bad or doubtful debts on receipt or credit basis.
• Provisions under Section 36(1)(via) allow scheduled banks, cooperative banks, and specified institutions to claim a deduction for provisions created for bad debts.
• Actual bad debts can be claimed as a deduction under Section 36(1)(vii) by all assessees.

Deduction for Head Office Expenditure in Case of Non-Residents under Section 44C

Section 44C of the Income-tax Act limits the deduction for head office expenditure incurred by non-residents while computing income under “Profits and Gains of Business or Profession.” Deduction is restricted to the lower of:

• 5% of adjusted total income, or
• Actual head office expenditure attributable to Indian operations.

Key Provisions

Eligibility for Deduction:

• Non-residents conducting business through branches in India are eligible.
• The section ensures compliance and prevents inflation of head office expense claims.

Ceiling on Deduction:

• Deduction is capped at the lesser of 5% of adjusted total income or actual expenditure.
• For losses, 5% of the average adjusted total income for the preceding years is used.

Definition of Head Office Expenditure:

• Includes expenses on rent, salaries, travel, and other general administration costs incurred outside India.
• Technical fees unrelated to executive and administrative functions are excluded from the 5% cap.

Adjusted Total Income:

• Calculated without considering certain deductions like unabsorbed depreciation, business losses, or Chapter VI-A deductions.

Average Adjusted Total Income (in case of losses):

• Based on total income from preceding three years, weighted as follows:
  • Three years: 1/3rd of aggregate adjusted total income.
  • Two years: 50% of aggregate adjusted total income.
  • One year: Total adjusted income for that year.

Administrative Clarifications:

• Technical fees received by the head office are taxed under the DTAA or domestic tax laws.
• Payments for technical services to third parties reimbursed through the head office are deductible without the 5% cap.

Computation of Business Income from Royalties or Fees for Technical Services (FTS) under Section 44DA

Royalty or Fees for Technical Services (FTS) received by a non-resident or foreign company is taxable under the head “Profits and Gains of Business or Profession” if connected to a Permanent Establishment (PE) or a fixed place of profession in India.

Key Provisions

Taxability Under Business Income:

• The income qualifies for taxation under “Business or Profession” if:
  • The taxpayer is a non-resident or foreign company.
  • Business is conducted through a PE or a fixed place of profession in India.
  • The income arises from royalty or FTS related to a government or Indian entity per an agreement after April 1, 2003.
  • The rights, property, or contracts generating the income are effectively connected to the PE or fixed place of profession.
• If these conditions are unmet, income is taxed under Section 115A at specified rates, subject to the DTAA under the head income from other sources as permanent establishment does not exist.

Restriction on Deductions:

• No deduction for expenses not wholly or exclusively incurred for the Indian business.
• Payments from the PE to the head office or other offices are non-deductible, except for reimbursed expenses.

Exclusion from Section 44BB:

• Income covered under Section 44DA is excluded from the applicability of Section 44BB, which pertains to the taxation of income from exploration, production, or extraction activities.

Compliance Requirements:

• Books of Accounts:
  • Non-residents and foreign companies must maintain books of accounts.
  • Accounts must be audited by a Chartered Accountant with a valid certificate of practice.
• Audit Report Submission:
  • An audit report in Form 3CE must be filed one month before the due date of the income tax return under Section 139(1).

Business Reorganisation of Co-operative Banks under Section 44DB

Section 44DB provides for the proportional allowance of deductions during the business reorganization of co-operative banks. The deductions cover depreciation, preliminary expenses, amalgamation expenses, and voluntary retirement expenses, shared between the predecessor and successor entities.

Key Provisions

Scope of Business Reorganization:

• Amalgamation: Merger of one or more co-operative banks into another co-operative bank, with conditions including:
  • Transfer of all assets and liabilities to the amalgamated bank.
  • Retention of at least 75% of voting rights or share value by members or shareholders of the amalgamating bank in the amalgamated bank.
• Demerger: Transfer of one or more undertakings by a co-operative bank to a resulting co-operative bank under specified conditions, including:
  • Transfer of assets and liabilities on a going concern basis at book values.
  • Issuance of proportionate membership in the resulting bank to the members of the demerged bank.
• Conversion: Transition of a primary co-operative bank into a banking company under RBI guidelines.
  • Quantum of Deduction:
• Proportional Allocation: Deductions are split between the predecessor and successor banks or converted entities based on the number of days they operated during the financial year.

Predecessor Bank:

Deduction allowable to predecessor bank	=	Total deduction allowable to predecessor bank if such business re-organisation had not taken place	X	No. of days from 1st day of financial year to the day immediately preceding the date of business re-organisation
				Total no. of days in financial year in which business re-organisation has taken place

Successor Bank:

Deduction allowable to successor bank or converted banking co.	=	Total deduction allowable to predecessor bank if such business re-organisation had not taken place	X	No. of days beginning with date of business re-organisation and ending on last date of the financial year
				Total no. of days in financial year in which business re-organisation has taken place

Treatment in Subsequent Years:

• For deductions related to preliminary expenses, voluntary retirement expenses, and amalgamation costs, unexpired periods continue to apply to the successor bank as if the reorganization had not occurred.

Reporting Obligation under Section 285B of the Income-tax Act, 1961

Section 285B mandates specific reporting obligations for persons involved in the production of cinematographic films or other specified activities, requiring them to report payments exceeding Rs. 50,000 in aggregate made or due to individuals engaged in these activities.

Applicability

Covered Persons:

• Film producers and individuals engaged in event management, documentary production, television or OTT program production, sports event management, performing arts, or other notified activities.
• Includes both residents and non-residents.
  • Non-Covered Persons:
    Non-covered persons are not required to report payments made to covered persons.

Reporting Requirements

• Reportable Payments: Payments exceeding 50,000 in aggregate during a financial year to any person engaged in production or specified activities.
• Exclusions: Payments to individuals not involved in production-related tasks, e.g., accountants or auditors.

Computation of Threshold Limit

• Threshold computed on a gross basis, including GST, reimbursements, and allied charges.
• Payments accrued or due but unpaid, as well as advance payments, are included.

Form and Timeline

• Form No. 52A : To be filed electronically within 60 days from the end of the financial year.
• Submission requires a digital signature or electronic verification code, depending on the person’s filing requirements.

Penalties for Non-Compliance

• Penalty under Section 272A: 500 for each day of delay unless reasonable cause is proven.

Income Tax Rules

Rule – 5

C. Profits and gains of business or profession

Depredation.

5. (1) Subject to the provisions of sub-rule (2), the allowance under clause (ii) of sub-section (1) of section 32 in respect of depreciation of any block of assets shall be calculated at the percentages specified in the second column of the Table in Appendix I to these rules on the written down value of such block of assets as are used for the purposes of the business or profession of the assessee at any time during the previous year :

²⁶[Provided that the allowance under clause (ii) of sub-section (1) of section 32 in respect of depreciation of any block of assets shall not exceed forty per cent of the written down value of such block of assets in case of —

(i) a domestic company which has exercised option under sub-section (4) of section 115EiA, or under sub-section (5) of section 115BAA, or under sub- section (7) of section 115BAB; or

(ii) an individual or a Hindu undivided family which has exercised option under sub-section (5) of section 115BAC; or

(iia) an individual or a Hindu undivided family, or an association of persons (other than a co-operative society) or a body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 whose income is chargeable to tax under sub-section (IA) of section 115BAC; or

(iii) a co-operative society resident in India which has exercised option under sub-section (5) of section 115BAD; or

(iv) a co-operative society resident in India which has exercised option under sub-section (5) of section 115BAE:1

²⁷[Provided further that, for the purposes of section 115BAA, if the following conditions are satisfied, namely:-

i. option under sub-section (5) thereof is exercised for a previous year relevant to the assessment year beginning on the 1st day of April, 2020;

ii. there is a depreciation allowance, in respect of a block of asset, from any earlier assessment year or allowance of unabsorbed depreciation deemed so under section 72A, which is attributable to the provisions in clause (iia) of sub-section (1) of section 32; and

iii. such depreciation or allowance for unabsorbed depreciation is not allowed to be set off under clause (ii) or clause (iii) of sub-section (2) thereof, the written down value of the block of asset as on the 1st day of April, 2019 shall be increased by such depreciation or allowance for unabsorbed depreciation not allowed to be set off:

Provided also that, ²⁸1for the purposes of section 115BAC Ins it stood immediately before its amendment by the Finance Act, 20231] and section 115BAD, if the following conditions are satisfied, namely:-

i. the option under sub-section (5) of the respective section is exercised for a previous year relevant to the assessment year beginning on the 1st day of April, 2021;

ii. there is a depreciation allowance, in respect of a block of asset, from any earlier assessment year which is attributable to the provisions in clause (iia) of sub-section (1) of section 32; and

iii. such depreciation is not allowed to be set off under sub-clause (a) of clause (ii) of sub-section (2) of section 115BAC or clause (ii) of sub-section (2) of section 115BAD, the written down value of the block of asset as on the 1st day of April, 2020 shall be increased by such depreciation not allowed to be set off:]

²⁹[Provided also that, where income is chargeable to tax under sub-section (IA) of section 115BAC, the written down value of the block of asset as on the 1st day of April, 2023 shall be increased by such depreciation which is attributable to clause (tia) of sub-section (1) of section 32 and which is not allowed to be set off under sub-clause (a) of clause (ti) of sub-section (2) of section 115BAC if both the following conditions are satisfied, namely:-

(i) the assessee has not exercised option under sub-section (5) for any previous year relevant to the assessment year beginning on or before the 1st day of April, 2023; and

(ii) there is a depreciation allowance in respect of a block of assets which has not been given full effect to prior to the assessment year beginning on the 1st day of April, 2024, and is attributable to the provisions of clause (tia) of sub-section (1) of section 321

(1A) The allowance under clause (i) of sub-section (1) of section 32 of the Act in respect of depreciation of assets acquired on or after 1st day of April, 1997 shall be calculated at the percentage specified in the second column of the Table in Appendix IA of these rules on the actual cost thereof to the assessee as are used for the purposes of the business of the assessee at any time during the previous year :

Provided that the aggregate depreciation allowed in respect of any asset for different assessment years shall not exceed the actual cost of the said asset : Provided further that the undertaking specified in clause (i) of sub-section (1) of section 32 of the Act may, instead of the depreciation specified in Appendix IA, at its option, be allowed depreciation under sub-rule (1) read with Appendix I, if such option is exercised before the due date for furnishing the return of income under sub-section (1) of section 139 of the Act,

a. for the assessment year 1998-99, in the case of an undertaking which began to generate power prior to 1st day of April, 1997; and

b. for the assessment year relevant to the previous year in which it begins to generate power, in case of any other undertaking :

Provided also that any such option once exercised shall be final and shall apply to all the subsequent assessment years.

(2) Where any new machinery or plant is installed during the previous year relevant to the assessment year commencing on or after the 1st day of April, 1988, for the purposes of business of manufacture or production of any article or thing and such article or thing—

a. is manufactured or produced by using any technology (including any process) or other know-how developed in, or

b. is an article or thing invented in,

a laboratory owned or financed by the Government or a laboratory owned by a public sector company or a University or an institution recognised in this behalf by the Secretary, Department of Scientific and Industrial Research, Government of India, such plant or machinery shall be treated as a part of block of assets qualifying for depreciation at the rate of 40 per cent of written down value, if the following conditions are fulfilled, namely :-

i. the right to use such technology (including any process) or other know- how or to manufacture or produce such article or thing has been acquired from the owner of such laboratory or any person deriving title from such owner;

ii. the return furnished by the assessee for his income, or the income of any other person in respect of which he is assessable, for any previous year in which the said machinery or plant is acquired, shall be accompanied by a certificate from the Secretary Department of Scientific and Industrial Research, Government of India, to the effect that such article or thing is manufactured or produced by using such technology (including any process) or other know-how developed in such laboratory or is an article or thing invented in such laboratory ; and

iii. the machinery or plant is not used for the purpose of business of manufacture or production of any article or thing specified in the list in the Eleventh Schedule to the Act.

Explanation.—For the purposes of this sub-rule,—

(a) “laboratory financed by the Government” means a laboratory owned by any body [including a society registered under the Societies Registration Act, 1860 (21 of 1860), and financed wholly or mainly by the Government ;

(b) “public sector company” means any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956); and

(c) “University” means a University established or incorporated by or under a Central, State or Provincial Act and includes an institution declared under section 3 of the University Grants Commission Act, 1956 (3 of 1956), to be a University for the purposes of that Act.

Notes:

²⁶ Substituted by the IT (Tenth Amdt.) Rules, 2023, w.e.f. 21-6-2023.

²⁷ Inserted by the IT (Twenty-second Amdt.) Rules, 2020, w.e.f. 1-10-2020.

²⁸ Substituted for “for the purposes of section 115BAC” by the IT (Tenth Amdt.) Rules, 2023, w.e.f. 21-6-2023.

²⁹ Inserted by the IT (Tenth Amdt.) Rules, 2023, w.e.f. 21-6-2023.

Rule – 5C

Guidelines, form and manner in respect of approval under clause (ii) and clause (iii) of sub-section (1) of section 35.

5C. (1) An application for approval,—

(i) under clause (ii) or clause (iii) of sub-section (1) of section 35 by a research association in 30[Form No. 3CF];

(ii) under clause (ii) or clause (iii) of sub-section (1) of section 35 by a university, college or other institution in 31[Form No. 3CF],

shall be made, at any time during the financial year immediately preceding the assessment year from which the approval is sought, to the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the applicant.

³²[(1A) Form No. 3CF shall be furnished electronically, —

(i) under digital signature, if the return of income is required to be furnished under digital signature;

(ii) through electronic verification code in a case not covered under clause (i).

(1B) Form No. 3CF shall be verified by the person who is authorised to verify the return of income under section 140, as applicable to the applicant.

(1C) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall:

(i) lay down the form, data structure, standards and procedure of furnishing and verification of Form No. 3CF;

(ii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the said application made.]

(2) Annexure to the application in Form No. ³³[3CF] shall be filled out if the association claims exemption under clause (21) of section 10 of the Income-tax Act.

(3) The applicant shall send a copy of the application in Form No. ³⁴[3CF] to Member (IT), Central Board of Direct Taxes accompanied by the acknowledgement receipt as evidence of having furnished the application form in duplicate in the office of the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the case.

(4) The period of one year, as specified in the fourth proviso to sub-section (1) of section 35, before the expiry of which approval is to be granted or the application is to be rejected by the Central Government shall be reckoned from the end of the month in which the application form from the applicant for approval is received in the office of Member (IT), Central Board of Direct Taxes.

(5) If any defect is noticed in the application in Form No. ³⁵[3CF] or if any relevant document is not attached thereto, the Commissioner of Income-tax or, as the case may be, the Director of Income-tax shall serve a deficiency letter on the applicant before the expiry of one month from the date of receipt of the application form in his office.

(6) The applicant shall remove the deficiency within a period of fifteen days from the date of service of the deficiency letter or within such further period which, on an application made in this behalf may be extended, so however, that the total period for removal of deficiency does not exceed thirty days, and if the applicant fails to remove the deficiency within the period of thirty days so allowed, the Commissioner of Income-tax or, as the case may be, the Director of Income-tax shall send his recommendation for treating the application as invalid to the Member (IT), Central Board of Direct Taxes.

(7) The Central Government, if satisfied, may pass an order treating the application as invalid.

(8) If the application form is complete in all respects, the Commissioner of Income-tax or, as the case may be, the Director of Income-tax, may make such inquiry as he may consider necessary regarding the genuineness of the activity of the association or university or college or other institution and send his recommendation to the Member (IT) for grant of approval or rejection of the application before the expiry of the period of three months to be reckoned from the end of the month in which the application form was received in his office.

(9) The Central Government may before granting approval under clause (ii) or clause (iii) shall call for such documents or information from the applicant as it may consider necessary and may get any inquiry made for verification of the genuineness of the activity of the applicant.

(10) The Central Government may, under sub-section (1) of section 35, issue the notification to be published in the Official Gazette granting approval to the association or university or college or other institution or for reasons to be recorded in writing reject the application.

(11) The Central Government may withdraw the approval granted under clause (ii) or clause (iii) of sub-section (1) of section 35 if it is satisfied that the research association or university or college or other institution has ceased its activities or its activities are not genuine or are not being carried out in accordance with all or any of the conditions under rule 5D or rule 5E.

(12) No order treating the application as invalid or rejecting the application or withdrawing the approval, shall be passed without giving a reasonable opportunity of being heard to the research association or university or college or other institution.

(13) A copy of the order invalidating or rejecting the application or withdrawing the approval shall be communicated to the applicant, the Assessing Officer and the Commissioner of Income-tax or, as the case may be, the Director of Income-tax.

Notes:

³⁰ Substituted for “duplicate in Form No. 3CF-I” by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021.

³¹ Substituted for “duplicate in Form No. 3CF-II” by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021.

³² Inserted by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021.

³³ Substituted for “3CF-I” by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021.

³⁴ Substituted for “3CF-I or, as the case may be, Form No. 3CF-II” by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021. Income Tax Department Ministry of Finance, Government of India

³⁵ Substituted for “3CF-I or Form No. 3CF-II” by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021

Rule – 5CA

³⁶[Intimation under fifth proviso to sub-section (1) of section 35.

5CA. (1) An intimation under fifth proviso to sub-section (1) of section 35 by a research association, university, college or other institution referred to in clause (ii) or clause (iii) or the company referred to in clause (iia) of said sub-section (hereinafter referred to as ‘the applicant’) shall be made in Form No.10A to the Principal Commissioner or Commissioner authorised by the Board.

(2) The application under sub-rule (1) shall be accompanied by the following documents, as required by Form No.10A, namely:—

(a) where the applicant is created or established under an instrument, self-certified copy of the instrument;

(b) where the applicant created or established otherwise than under an instrument, self-certified copy of the document evidencing the creation or establishment of the applicant;

(c) self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts or other registration document, as the case may be;

(d) self-certified copy of registration under Foreign Contribution (Regulation) Act, 2010 (42 of 2010), if the applicant is registered under such Act;

(e) self-certified copy of existing Notification granting approval under section 35.

(3) Form No. 10A shall be furnished electronically, —

(i) under digital signature, if the return of income is required to be furnished under digital signature;

(ii) through electronic verification code in a case not covered under clause (i).

(4) Form No. 10A shall be verified by the person who is authorised to verify the return of income under section 140, as applicable to the applicant.

(5) On receipt of an application in Form No. 10A, the Principal Commissioner or Commissioner, authorised by the Board shall issue a sixteen digit alphanumeric Unique Registration Number (URN) to the applicants making application as per sub-rule (1).

(6) If, at any point of time, it is noticed that Form No.10A has not been duly filled in by not providing, fully or partly, or by providing false or incorrect information or documents required to be provided under sub-rule (1) or (2) or by not complying with the requirements of sub-rule (3) or (4), the Principal Commissioner or Commissioner, after giving an opportunity of being heard, may cancel the Unique Registration Number (URN) issued under sub-rule (5) and such Unique Registration Number (URN) shall be deemed to have never been issued.

(7) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall:

(i) lay down the data structure, standards and procedure of furnishing and verification of Form No. 10A; and

(ii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the said form so furnished.]

Note:

³⁶ Inserted by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021

Rule – 5D

Conditions subject to which approval is to be granted to a research association under clause (ii) or clause (iii) of sub-section (1) of section 35.

5D. (1) The sole object of the applicant research association shall be to undertake scientific research or research in social science or statistical research, as the case may be.

(2) The applicant research association shall carry on the research activity by itself.

(3) The research association seeking approval under clause (ii) or clause (iii) of sub-section (1) of section 35 shall maintain books of account and get such books audited by an accountant as defined in the Explanation to sub-section (2) of section 288 and furnish the report of such audit duly signed and verified by such accountant to the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the case, by the due date of furnishing the return of income under sub-section (1) of section 139.

(4) The research association shall maintain a separate statement of donations received and amount applied for scientific research or research in social science or statistical research and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to in sub-rule (3).

(5) The research association shall, by the due date of furnishing the return of income under sub-section (1) of section 139, furnish a statement to the Commissioner of Income-tax or Director of Income-tax containing—

(i) a detailed note on the research work undertaken by it during the previous year;

(ii) a summary of research articles published in national or international journals during the year;

(iii) any patent or other similar rights applied for or registered during the year;

(iv) programme of research projects to be undertaken during the forthcoming year and the financial allocation for such programme.

(6) If the Commissioner of Income-tax or the Director of Income-tax is satisfied that the research association,—

(a) is not maintaining books of account, or

(b) has failed to furnish its audit report, or

(c) has not furnished its statement of the sums received and the sums applied for scientific research or research in social science or statistical research or a statement referred to in sub-rule (5), or

(d) has ceased to carry on its research activities, or its activities are not genuine, or

(e) is not fulfilling the conditions subject to which approval was granted to it,

he may after making appropriate enquiries furnish a report on the circumstances referred to in clauses (a) to (e) above to the Central Government within six months from the date of furnishing the return of income under sub-section (1) of section 139.

Rule – 5E

Conditions subject to which approval is to be granted to a University, College or other Institution under clause (ii) and clause (iii) of sub-section (1) of section 35.

5E. (1) The sum paid to a university, college or other institution shall be used for scientific research and research in social science or statistical research.

(2) The applicant university, college or other institution shall carry out scientific research, research in social science or statistical research through its faculty members or its enrolled students.

(3) A university or college or other institution approved under clause (ii) or clause (iii) of sub-section (1) of section 35 shall maintain separate books of account in respect of the sums received by it for scientific research or, as the case may be, for research in social science or statistical research, reflect therein the amount used for carrying out research, get such books of account audited by an accountant, as defined in the Explanation to sub-section (2) of section 288 and furnish the report of such audit duly signed and verified by such accountant to the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the case, by the due date of furnishing the return of income under sub-section (1) of section 139.

(4) The university or college or other institution shall maintain a separate statement of donations received and the amount used for research and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to in sub-rule (3).

(4A) The university, college or other institution shall, by the due date of furnishing the return of income under sub-section (1) of section 139, furnish a statement to the Commissioner of Income-tax or Director of Income-tax containing—

(i) a detailed note on the research work undertaken by it during the previous year;

(ii) a summary of research articles published in national or international journals during the year;

(iii) any patent or other similar rights applied for or registered during the year;

(iv) programme of research projects to be undertaken during the forthcoming year and the financial allocation for such programme.

(5) If the Commissioner of Income-tax or the Director of Income-tax is satisfied that the university or college or other institution,—

(a) is not maintaining separate books of account for research activities, or

(b) has failed to furnish its audit report, or

(c) has not furnished its statement of the sums received and the sums used for research or a statement referred to in sub-rule (4A), or

(d) has ceased to carry on its research activities, or its activities are not genuine, or

(e) is not fulfilling the conditions subject to which approval was granted to it,

he may after making appropriate enquiries furnish a report on the circumstances referred to in clauses (a) to (e) above to the Central Government within six months from the date of furnishing the return of income under section 139(1).

Rule – 5F

Prescribed authority, guidelines, form, manner and conditions for approval under clause (iia) of sub-section (1) of section 35.

5F. (1) For the purposes of clause (Ha) of sub-section (1) of section 35, the prescribed authority shall be the Chief Commissioner of Income-tax having jurisdiction over the applicant.

(2) Guidelines, form and manner in respect of approval under clause (Ha) of sub-section (1) of section 35 shall be as under :—

(a) An application for approval under clause (Ha) of sub-section (1) of section 35 by a company shall be made in ³⁷[Form No. 3CF], to the Commissioner of Income-tax having jurisdiction over the applicant, at any time during the financial year immediately preceding the assessment year from which the approval is sought.

³⁸[(aa) Form No. 3CF shall be furnished electronically, —

(i) under digital signature, if the return of income is required to be furnished under digital signature;

(ii) through electronic verification code in a case not covered under clause (i).

(ab) Form No. 3CF shall be verified by the person who is authorised to verify the return of income under section 140, as applicable to the applicant.

(ac) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall:

(i) lay down the form, data structure, standards and procedure of furnishing and verification of Form No. 3CF;

(ii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the said application made.]

(b) The applicant shall send a copy of the application in Form No. ³⁹[3CF] to the prescribed authority, accompanied by the acknowledgement receipt as evidence of having furnished the application form in duplicate in the Office of the Commissioner of Income-tax having jurisdiction over the case.

(c) Every notification under clause (Ha) of sub-section (1) of section 35 shall be issued or an order rejecting the application shall be passed within a period of twelve months from the end of the month in which the application was received in the Office of the Chief Commissioner of Income-tax.

(d) If any defect is noticed in the application in Form No. ³⁹[3CF] or if any relevant document is not attached thereto, the Commissioner of Income-tax shall serve a deficiency letter on the applicant before the expiry of one month from the date of receipt of the application form in his office.

(e) The applicant shall remove the deficiency within a period of fifteen days from the date of service of the deficiency letter or within such further period which, on an application made in this behalf may be extended, so however, that the total period for removal of deficiency does not exceed thirty days, and if the applicant fails to remove the deficiency within the period of thirty days so allowed, the Commissioner of Income-tax shall send his recommendation to the Chief Commissioner of Income-tax for treating the application as invalid.

(f) The Chief Commissioner of Income-tax may, after examining the re-commendations referred to in clause (e), pass an order that the application is invalid.

(g) If the application form is complete in all respects, the Commissioner of Income-tax may, make such inquiry as he may consider necessary regarding the genuineness of the activity of the company and send his recommendation to the Chief Commissioner of Income-tax for grant of approval or rejection of the application before the expiry of the period of three months to be reckoned from the end of the month in which the application form was received in his office.

(h) The Chief Commissioner of Income-tax may, before granting approval under clause (Ha) of sub-section (1) of section 35, call for such documents or information from the applicant as it considers necessary and may get any inquiry made for verification of the genuineness of the activity of the applicant.

(i) The Chief Commissioner of Income-tax may, under sub-section (1) of section 35, issue the notification to be published in the Official Gazette granting approval to the company or for reasons to be recorded in writing reject the application.

(j) The Chief Commissioner of Income-tax may withdraw the approval granted under clause (Ha) of sub-section (1) of section 35 if he is satisfied that the company has ceased to carry on its activities or its activities are not genuine or are not being carried on in accordance with all or any of the conditions under this rule :

Provided that no order treating the application as invalid or rejecting the application or withdrawing the approval shall be passed without giving a reasonable opportunity of being heard to the company.

(k) A copy of the order invalidating or rejecting the application or withdrawing the approval shall be communicated to the applicant, the Assessing Officer and the Commissioner of Income-tax.

(3) Approval to a company under clause (Ha) of sub-section (1) of section 35 shall be subject to the following conditions, namely :—

(a) The sum paid to the company shall be used for scientific research.

(b) The applicant company shall carry on scientific research through its own employees using its own assets.

(c) A company approved under clause (Ha) of sub-section (1) of section 35 shall maintain separate books of account in respect of the sums received by it for scientific research, reflect therein the amount used for carrying on research, get such books of account audited by an accountant, and furnish the report of such audit duly signed and verified by such accountant to the Commissioner of Income-tax having jurisdiction over the case, by the due date of furnishing the return of income under sub-section (1) of section 139.

Explanation.—For the purpose of this clause “accountant” shall have the same meaning as assigned to it in Explanation to sub-section (2) of section 288 of the Act.

(d) The company shall maintain a separate statement of donations received and the amount used for research and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to in sub-rule (3).

(e) Subsequent to approval, the company shall, every year, by the due date of furnishing the return of income under sub-section (1) of section 139, furnish a statement to the Commissioner of Income-tax containing the following information, namely :—

(i) a detailed note on the research work undertaken by it during the previous year;

(ii) a summary of research articles published in national or international journals during the year;

(iii) any patents or other similar rights applied for or registered during the year;

(iv) programme of research projects to be undertaken during the forthcoming year and the financial allocation for such subjects.

(f) If the Commissioner of Income-tax is satisfied that the company,—

(i) is not maintaining separate books of account for research activities; or

(ii) has failed to furnish its audit report; or

(iii) has not furnished its statement of the sums received and the sums used for research, or a statement referred to in sub-clause (e); or

(iv) has ceased to carry on its research activities, or its activities are not genuine; or

(v) is not fulfilling the conditions subject to which approval was granted to it,

he may after making appropriate enquiries, furnish a report on the circumstances referred to in sub-clauses (i) to (v) to the jurisdictional Chief Commissioner of Income-tax within six months from the date of furnishing the return of income under sub-section (1) of section 139.

Notes:

³⁷ Substituted for “duplicate in Form No. 3CF-III” by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021.

³⁸ Clauses (aa) to (ac) inserted by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021.

³⁹ Substituted for “3CF-III” by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021.

Rule – 6

Prescribed authority for expenditure on scientific research.

6. (1) For the purposes of clause (i) of sub-section (1) and sub-section (2A) of section 35, the prescribed authority shall be the Director General (Income-tax Exemptions) in concurrence with the Secretary, Department of Scientific and Industrial Research, Government of India.

(1A) For the purposes of sub-section (2AA) of section 35, the prescribed authority shall be—

a. in the case of a National Laboratory or a University or an Indian Institute of Technology, the head of the National Laboratory or the University or the Indian Institute of Technology, as the case may be; and

b. in the case of a specified person, the Principal Scientific Adviser to the Government of India.

(1B) For the purposes of sub-section (2AB) of section 35, the prescribed authority shall be the Secretary, Department of Scientific and Industrial Research.

(2)[***]

(3) The application for obtaining approval under sub-section (2AA) of section 35 shall be made by a sponsor in Form No. 3CG.

Explanation.—For the purposes of this rule “sponsor” means a person who makes an application in Form No. 3CG.

(4) The application required to be furnished by a company under sub-section (2AB) of section 35 shall be in Form No. 3CK.

(5) The head of the National Laboratory or the University or the Indian Institute of Technology or the Principal Scientific Adviser to the Government of India shall, if he is satisfied that it is feasible to carry out the scientific research programme then, subject to other conditions prescribed in this rule and section 35(2AA) of the Act, pass an order in writing in Form No. 3CH :

Provided that a reasonable opportunity of being heard shall be granted to the sponsor before rejecting an application :

Provided further that an order under this rule shall be passed within two months of the receipt of the application under sub-rule (1A) :

Provided also that the Principal Scientific Adviser to the Government of India may authorise an officer who is not below the rank of a Deputy Secretary to issue such order, after the scientific research programme has been approved by him.

(5A) The prescribed authority shall, if he is satisfied that the conditions provided in this rule and in sub-section (2AB) of section 35 of the Act are fulfilled, pass an order in writing in Form No. 3CM:

Provided that a reasonable opportunity of being heard shall be granted to the company before rejecting an application.

(6) The National Laboratory, University, Indian Institute of Technology or specified person shall issue a receipt of payment for carrying out an approved programme of scientific research under sub-section (2AA) in Form No. 3CI.

(7) Approval of a programme under sub-section (2AA) shall be subject to the following conditions :—

a. The programme should not relate purely to market research, sales promotion, quality control, testing, commercial production, style changes, routine data collection or activities of a like nature;

b. The prescribed authority shall submit its report to the 41[Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax or Principal Director General of Income-tax or Director General of Income-tax having jurisdiction over the sponsor] in Form No. 3CJ within a period of three months from the date of granting approval to the programme:

Provided that the officer authorised by the prescribed authority, being the Principal Scientific Adviser to the Government of India, under sub-rule (5) shall submit such report to the 41[Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax or Principal Director General of Income-tax or Director General of Income-tax having jurisdiction over the sponsor];

c. The sponsor and the National Laboratory, University, Indian Institute of Technology or specified person, as the case may be, shall submit to the 42[Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax or Principal Director General of Income-tax or Director General of Income-tax having jurisdiction over the sponsor] a yearly statement showing progress of implementation of the approved programme and actuals of expenditure incurred thereon;

d. The prescribed authority shall not extend the duration of the programme or approve any escalation in costs;

e. The National Laboratory, University, Indian Institute of Technology or specified person, as the case may be, shall maintain a separate account for each approved programme ; which shall be audited annually and a copy thereof shall be furnished to the 42[Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax or Principal Director General of Income-tax or Director General of Income-tax having jurisdiction over the sponsor] by 31st day of October of each succeeding year;

f. Assets acquired by the prescribed authority for executing the approved programme shall not be disposed of without the approval of the 42[Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax or Principal Director General of Income-tax or Director General of Income- tax having jurisdiction over the sponsor];

g. On completion of the approved programme, a completion certificate along with a copy of the report on the research activities carried out and salient features of the result obtained and its further application for commercial exploitation shall be jointly submitted by the sponsor and the National Laboratory, University, Indian Institute of Technology or specified person to the 42[Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax or Principal Director General of Income-tax or Director General of Income-tax having jurisdiction over the sponsor];

h. A copy of the audited statement of accounts for the approved programme shall be submitted by the Head of the National Laboratory, University or Indian Institute of Technology or the Principal Scientific Adviser to the Government of India to the 42[Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax or Principal Director General of Income-tax or Director General of Income-tax having jurisdiction over the sponsor] within six months of the completion of the programme.

(7A) Approval of expenditure incurred on in-house research and development facility by a company under sub-section (2AB) of section 35 shall be subject to the following conditions, namely :—

(a) The facility should not relate purely to market research, sales promotion, quality control, testing, commercial production, style changes, routine data collection or activities of a like nature;

43[(b) The prescribed authority shall furnish electronically its report,—

i. in relation to the approval of in-house research and development facility in Part A of Form No. 3CL;

ii. quantifying the expenditure incurred on in-house research and development facility by the company during the previous year and eligible for weighted deduction under sub-section (2AB) of section 35 of the Act in Part B of Form No. 3CL;

(ba) The report in Form No. 3CL referred to in clause (b) shall be furnished electronically by the prescribed authority to the Principal Chief Commissioner of Income-tax or Chief Commissioner of Income-tax or Principal Director General of Income-tax or Director General of Income-tax having jurisdiction over such company within one hundred and twenty days,—

i. of the grant of the approval, in a case referred to in sub-clause (i) of clause (b);

ii. of the submission of the audit report, in a case referred to in sub-clause (ii) of clause (b);]

(c) The company shall maintain a separate account for each approved facility; which shall be audited annually and 44[a report of audit in Form No. 3CLA shall be furnished electronically to the Secretary, Department of Scientific and Industrial Research on or before the due date specified in Explanation 2 to sub-section (1) of section 139 of the Act for furnishing the return of income, for each succeeding year].

Explanation.— For the purposes of this sub-rule the expression “audited” means the audit of accounts by an accountant, as defined in the Explanation below sub-section (2) of section 288 of the Income-tax Act, 1961;

(d) Assets acquired in respect of development of scientific research and development facility shall not be disposed of without the approval of the Secretary, Department of Scientific and Industrial Research.

45[(8) For the purposes of this rule, the Principal Director General of Income-tax (Systems) shall specify the procedures, formats and standards for ensuring secure capture and transmission of data, and shall also be responsible for the day-to-day administration in relation to furnishing the information in the manner so specified.]

Notes:

⁴¹ Substituted for “Director General (Income-tax Exemptions)” by the IT (Tenth Amdt.) Rules, 2016, w.e.f. 1-7-2016.

⁴² Substituted for “Director General (Income-tax Exemptions)” by the IT (Tenth Amdt.) Rules, 2016, w.e.f. 1-7-2016.

⁴³ Substituted by the IT (Tenth Amdt.) Rules, 2016, w.e.f. 1-7-2016.

⁴⁴ Substituted for “a copy thereof shall be furnished to the Secretary, Department of Scientific and Industrial Research by 31st day of October of each succeeding year” by the IT (Tenth Amdt.) Rules, 2016, w.e.f. 1-7-2016.

⁴⁵ Inserted by the IT (Tenth Amdt.) Rules, 2016, w.e.f. 1-7-2016.

Rule – 6A

46[Expenditure for obtaining right to use spectrum for telecommunication services.

6A. (1) For the purpose of section 35ABA, the term “payment has actually been made” shall mean,—

(i) where an assessee has opted and been allowed by the Department of Telecommunications, Government of India to make full upfront payment of spectrum fee, the actual payment of expenditure irrespective of the previous year in which the liability for the expenditure was incurred according to the method of accounting regularly employed by the assessee;

(ii) where an assessee has opted and been allowed by the Department of Telecommunications, Government of India to make deferred payment, the amount which would have been payable by the assessee had he opted for full upfront payment of spectrum fee irrespective of the previous year in which the liability for the expenditure was incurred according to the method of accounting regularly employed by the assessee.

(2) In case of deferred payment referred to in clause (b) of sub-rule (1), where there is failure by the assessee to comply with any of the conditions specified by the scheme of the Department of Telecommunications, Government of India and Department of Telecommunications terminates the allotment or assignment of spectrum, the Assessing Officer shall, in exercise of power vested in him under sub-section (3) of section 35ABA shall re-compute the total income of the assessee for the previous year in which the deduction has been claimed and granted to him by deeming that,—

(i) the total amount of spectrum fee paid up to the date of termination is the amount of “payment actually been made”;

(ii) the spectrum was in force up to the date of its termination for the purpose of computing “relevant previous year”.]

Note:

⁴⁶ Inserted by the IT (Twenty-fourth Amdt.) Rules, 2016, w.e.f. 4-10-2016.

Rule – 6AAF

Guidelines for approval of skill development project under section 35CCD.

6AAF. (1) A skill development project shall be considered for notification if it is undertaken by an eligible company and the project is undertaken in separate facilities in a training institute.

(2) The eligible company, before undertaking any skill development project, shall make an application for notification of such project under sub-section (1) of section 35CCD, in duplicate, in Form No. 3CQ, to the National Skill Development Agency (hereinafter referred to as the NSDA).

(3) The eligible company shall also send a copy of the application in Form No. 3CQ to the Commissioner of Income-tax or the Director of Income-tax, as the case may be, having jurisdiction over the case, accompanied by the acknowledgement receipt as evidence of having furnished the application form in duplicate to the NSDA.

(4) The application shall be accompanied by the following, namely :—

(a) detailed note on the skill development project to be undertaken by the eligible company;

(b) details of the expenditure expected to be incurred on the project and expected date of completion of the project; and

(c) a letter of concurrence from the training institute in which the skill development project is to be undertaken.

(5) If any defect is noticed in the application referred to in sub-rule (2) or if any relevant document is not attached thereto, the NSDA shall, before the expiry of one month from the date of receipt of the application in its office, intimate the defect to the applicant for its rectification.

(6) The applicant shall remove the defect within a period of fifteen days from the date of such intimation or within such further period as, on an application made in this behalf, may be extended by the NSDA, so however, that the total period for removal of the defect does not exceed thirty days, and if the applicant fails to remove the defect within such period so allowed, the NSDA shall send its recommendation for treating the application as invalid to the CBDT.

(7) On receipt of recommendation of the NSDA under sub-rule (6), the CBDT, if satisfied, may pass an order treating the application as invalid.

(8) If the application form is complete in all respects, the NSDA may make such inquiry or call for such documents from the eligible company or the training institute as it may consider necessary for satisfying itself regarding the genuineness of the current and proposed activity of the applicant and send its recommendation to the CBDT for grant of approval or rejection of the application before the expiry of the period of two months to be reckoned from the end of the month in which the application form complete in all respects was received in its office.

(9) The Commissioner of Income-tax or the Director of Income-tax, as the case may be, having jurisdiction over the case shall send his recommendation to the NSDA for grant of approval or rejection of the application, after considering the compliance of the applicant with the various provisions of Income-tax Act, 1961 and Wealth-tax Act, 1957, before the expiry of the period of one month to be reckoned from the end of the month in which the copy of the application was received in his office.

(10) If the NSDA recommends the grant of approval under sub-rule (8), the CBDT shall, within a period of fifteen days from the end of the month in which it receives the report from the NSDA, under sub-section (1) of section 35CCD, issue a notification in Form No. 3CR to be published in the Official Gazette specifying the skill development project subject to conditions mentioned in rule 6AAG or such other conditions, as it may deem fit, to be effective for such period not exceeding three assessment years and if the NSDA recommends the rejection of the application under sub-rule (8), the CBDT shall pass an order rejecting the application.

(11) If the CBDT is satisfied with the activities of the skill development project during the period of notification, it may notify the said project for a further period in consultation with the NSDA.

(12) A copy of the notification issued under sub-rule (10) or sub-rule (11) shall be sent to the applicant, the NSDA, the training institute and the Commissioner of Income-tax or the Director of Income-tax, as the case may be, having jurisdiction over the case.

(13) The CBDT may rescind the notification issued under sub-rule (10) or sub-rule (11) at any time, if it is satisfied that the eligible company or the training institute, as the case may be, has ceased its activities or its activities are not genuine or the activities of the skill development project are not being carried out in accordance with all or any of the relevant provisions of the Act or this rule or rule 6AAG or the conditions subject to which the notification was issued.

(14) An order rescinding the notification shall not be passed unless the applicant has been given an opportunity of being heard in the matter.

(15) A copy of any order invalidating or rejecting the application or rescinding the notification shall be sent to the applicant, the training institute, the NSDA and the Commissioner of Income-tax or the Director of Income-tax, as the case may be, having jurisdiction over the case.

Rule – 6AAG

Conditions subject to which a skill development project is to be notified under section 35CCD.

6AAG. (1) The company undertaking skill development project shall maintain separate books of account of the skill development project notified under sub-section (1) of section 35CCD, and get such books of account audited by an accountant as defined in the Explanation below sub-section (2) of section 288.

(2) The audit report referred to in sub-rule (1) shall include the comments of the auditor on the true and fair view of the books of account maintained for skill development project, the genuineness of the activities of the skill development project and fulfilment of the conditions specified in the relevant provisions of the Act or the rules or the conditions mentioned in the notification issued under sub-rule (10) or sub-rule (11) of rule 6AAF.

(3) A skill development project in respect of existing employees of the company shall not be eligible for notification under sub-section (1) of section 35CCD, where the training of such employees commences after six months of their recruitment.

(4) All expenses (not being expenditure in the nature of cost of any land or building), incurred wholly and exclusively for undertaking a notified skill development project shall be eligible for deduction under section 35CCD :

Provided that any expenditure incurred on the skill development project which is reimbursed or reimbursable to the company by any person, whether directly or indirectly, shall not be eligible for deduction under section 35CCD.

(5) The company shall, on or before the due date of furnishing the return of income under sub-section (1) of section 139, furnish the audited statement of accounts of the skill development project for the previous year along with the audit report and amount of deduction claimed under sub-section (1) of section 35CCD to the Commissioner of Income-tax or the Director of Income-tax, as the case may be.

(6) If the Commissioner of Income-tax or the Director of Income-tax, as the case may be, is satisfied that the,—

(a) company has not maintained separate books of account for the skill development project or has not got such books of account audited by an accountant in accordance with sub-rule (1);

(b) company has not furnished the documents referred to in sub-rule (5);

(c) company has ceased to carry out activities of skill development project;

(d) activities of skill development project of the company are not genuine; or

(e) activities of the skill development project of the company are not being carried out in accordance with the relevant provisions of the Act or the rules or the conditions subject to which the notification was issued,

he shall, after making appropriate inquiries, furnish a report on the circumstances referred to in clauses (a) to (e) to the CBDT for appropriate action under sub-rule (13) of rule 6AAF.

(7) If the NSDA is not satisfied about the genuineness of the activities of the notified skill development project, the NSDA shall send its recommendation to the CBDT for appropriate action under sub-rule (13) of rule 6AAF.

Rule – 6AAH

Meaning of expressions used in rule 6AAF and rule 6AAG. 6AAH. For the purposes of rule 6AAF and rule 6AAG—

(i) “Eligible company” means a company, which is—

(a) engaged in the business of manufacture or production of any article or thing, not being an article or thing mentioned at serial number 1 and serial number 2 of the list of articles or things specified in the Eleventh Schedule; or

(b) engaged in providing services mentioned in column (2) of the Table below:

TABLE

S.No.	Particulars
(1)	(2)
1.	Accounting services
2.	Architect services
3.	Automobile repair or maintenance
4.	Banking, insurance and financial services including ATM installation, maintenance and operations or banking correspondents or insurance agents
5.	Beauty and cosmetology, including hair styling or manicurists or pedicurists
6.	Cable operators or Direct To Home (DTH) services
7.	Cargo Handling and stevedoring services
8.	Construction including painting or woodwork or plumbing or flooring or electrical wiring or installation or maintenance of lifts
9.	Courier services
10.	Design services including fashion or gems and jewellery or apparel or industrial designing
11.	Event management
12.	Facilities management, housekeeping, cleaning services
13.	Fire and safety services
14.	Food processing or preservation services, including post harvesting and post farm-gate skills
15.	Health and Wellness services including spa or nutritionists or weight management or health instructors or yoga or gym trainers
16.	Home decor services, landscaping
17.	Hospital and Healthcare services, such as Lab technicians, nursing and other paramedical staff
18.	Hospitality, including culinary skills or catering services
19.	Logistics and Transportation by any mode, including by air, sea, road, rail or pipelines, and related services such as driving or operation of heavy machinery equipment, forwarding agents, packers and movers
20.	Market research services
21.	Media or film or advertising
22.	Mining and extraction of mineral resources, including hydrocarbons
23.	Packaging and Warehousing, including both ambient temperature storage and cold storage, operation of Internal Container Depots and Container Freight Stations
24.	Port and maritime services such as dredging, piloting, tug boat operations, shipbuilding, ship scrapping, bunkering
25.	Power Sector Services, including those required for erection or installation or maintenance of equipment or towers, etc. in generation, transmission or distribution sector projects
26.	Private Security, including guards, supervisors, installation and maintenance of security equipment etc.
27.	Refrigeration and air-conditioning
28.	Repair and maintenance services, including Installation and servicing of household goods or white goods
29.	Retail marketing, including shop floor assistants or merchandisers
30.	Telecom services, including erection and maintenance of towers
31.	Travel and tourism, including guides or ticketing or sales or cab drives

50[(ii) “Training institute” means a training institute,—

a. set up by the Central Government or a State Government or a local authority;

b. affiliated to the National Council for Vocational Training or a State Council for Vocational Training;

c. affiliated to, or approved by, or empanelled by, the National Skill Development Agency;

d. affiliated to, or approved by, or empanelled by, the Central Government and certified by the National Council for Vocational Training as having training standards equivalent to training institutes affiliated to the National Council for Vocational Training; or

e. affiliated to, or approved by or empanelled by, the State Government and certified by the National Council for Vocational Training or a State Council for Vocational Training as having training standards equivalent to training institutes affiliated to the National Council for Vocational Training or, as the case may be, the State Council for Vocational Training.]

(iii) “National Council for Vocational Training” means the National Council for Training in Vocational Trades established by the resolution of the Government of India in the Ministry of Labour (Directorate General of Resettlement and Employment) No. TR/E.P.-24/56, dated the 21st August, 1956 and re-named as the National Council for Vocational Training by the resolution of the Government of India in the Ministry of Labour (Directorate General of Employment and Training) No. DGET/12/21/80-TC, dated the 30th September, 1981.

(iv) “State Council for Vocational Training” means a State Council for Training in Vocational Trades established by the State Government.

51[(v) “National Skill Development Agency” means the agency constituted by the Government of India vide notification No. 14/27/2012-EC, dated the 6th June, 2013.]

Notes:

⁵⁰ Substituted by the IT (Second Amdt.) Rules, 2014, w.e.f. 20-3-2014.

⁵¹ Inserted by the IT (Second Amdt.) Rules, 2014, w.e.f. 20-3-2014.

Rule – 6AB

Form of audit report for claiming deductions under sections 35D and 35E.

6AB. The report of audit of the accounts of an assessee, other than a company or a co-operative society, which is required to be furnished under sub-section (4) of section 35D or sub-section (6) of section 35E shall be in Form No. 3AE.

Rule – 6ABA

Computation of aggregate average advances for the purposes of clause (viia) of sub-section (1) of section 36.

6ABA. For the purposes of clause (viia) of sub-section (1) of section 36, the aggregate average advances made by the rural branches of a scheduled bank shall be computed in the following manner, namely :—

(a) the amounts of advances made by each rural branch as outstanding at the end of the last day of each month comprised in the previous year shall be aggregated separately;

(b) the sum so arrived at in the case of each such branch shall be divided by the number of months for which the outstanding advances have been taken into account for the purposes of clause (a);

(c) the aggregate of the sums so arrived at in respect of each of the rural branches shall be the aggregate average advances made by the rural branches of the scheduled bank.

Explanation.—In this rule, “rural branch” and “scheduled bank” shall have the meanings assigned to them in the Explanation to clause (viia) of sub-section (1) of section 36.

Rule – 6ABAA

Infrastructure facility under clause (g) of the Explanation to clause (viii) of sub-section (1) of section 36.

6ABAA. The conditions to be fulfilled by a public facility to be eligible to be notified as an infrastructure facility in accordance with the provisions of clause (g) of the Explanation to clause (viii) of sub-section (1) of section 36 shall be the following, namely :—

(a) it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act;

(b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility similar in nature to an infrastructure facility referred to in the Explanation to clause (i) of sub-section (4) of section 80-IA;

(c) it has started or starts operating and maintaining such infrastructure facility on or after the 1st day of April, 1995.

Rule – 6ABBA

⁵²[Other electronic modes.

6ABBA. The following shall be the other electronic modes for the purposes of clause (d) of first proviso to section 13A, clause (f) of sub-section (8) of section 35AD, sub-section (3), sub-section (3A), proviso to sub-section (3A) and sub-section (4) of section 40A, second proviso to clause (1) of section 43, sub-section (4) of section 43CA, proviso to sub-section (1) of section 44AD, second proviso to sub-section (1) of section 50C, second proviso to sub-clause (b) of clause (x) of sub-section (2) of section 56, clause (b) of first proviso of clause (i) of Explanation to section 80JJAA, section 269SS, section 269ST and section 269T, namely:—

(a) Credit Card;

(b) Debit Card;

(c) Net Banking;

(d) IMPS (Immediate Payment Service);

(e) UPI (Unified Payment Interface);

(f) RTGS (Real Time Gross Settlement);

(g) NEFT (National Electronic Funds Transfer), and

(h) BHIM (Bharat Interface for Money) Aadhaar Pay.]

Note:

⁵² Inserted by the IT (Third Amdt.) Rules, 2020, w.r.e.f. 1-9-2019.

Rule – 6ABBB

⁵³[Form of statement to be furnished regarding preliminary expenses incurred under section 35D.

6ABBB. (1) The statement containing particulars of expenditure required to be furnished under proviso to clause (a) of sub-section (2) of section 35D by the assessee shall be in Form No. 3AF for each previous year.

(2) Form No. 3AF shall be furnished one month prior to the due date for furnishing the return of income as specified under sub-section (1) of section 139.

(3) Form No. 3AF shall be furnished to the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, or any person authorised by the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems).

(4) Form No. 3AF, shall be furnished electronically,—

(i) under digital signature, if the return of income is required to be furnished under digital signature;

(ii) through electronic verification code in a case not covered under clause (i).

(5) The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems), as the case may be, shall specify the procedures for furnishing Form No. 3AF and shall also be responsible for formulating and evolving appropriate security, archival and retrieval policies in relation to the form so furnished.

(6) The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems), as the case may be, or any person authorised by the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) shall forward Form No. 3AF to the Assessing Officer.]

Note:

⁵³ Inserted by the IT (Fourteenth Amdt.) Rules, 2023, w.e.f. 1-4-2024

Rule – 6DD

54[Cases and circumstances in which a payment or aggregate of payments exceeding ten thousand rupees may be made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as prescribed in rule 6ABBA.]

6DD. No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3A) of section 40A where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or 55[account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as prescribed under rule 6ABBA, exceeds ten thousand rupees] in the cases and circumstances specified hereunder, namely :—

a. where the payment is made to—

i. the Reserve Bank of India or any banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);

ii. the State Bank of India or any subsidiary bank as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959);

iii. any co-operative bank or land mortgage bank;

iv. any primary agricultural credit society or any primary credit society as defined under section 56 of the Banking Regulation Act, 1949 (10 of 1949);

v. the Life Insurance Corporation of India established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956);

b. where the payment is made to the Government and, under the rules framed by it, such payment is required to be made in legal tender;

c. where the payment is made by—

i. any letter of credit arrangements through a bank;

ii. a mail or telegraphic transfer through a bank;

iii. a book adjustment from any account in a bank to any other account in that or any other bank;

iv. a bill of exchange made payable only to a bank;

v. to vii 56-57[***]

Explanation.—For the purposes of this clause and clause (g), the term “bank” means any bank, banking company or society referred to in sub-clauses (i) to (iv) of clause (a) and includes any bank [not being a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), whether incorporated or not, which is established outside India;

d. where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee;

e. where the payment is made for the purchase of—

i. agricultural or forest produce; or

ii. the produce of animal husbandry (including livestock, meat, hides and skins) or dairy or poultry farming; or

iii. fish or fish products; or

iv. the products of horticulture or apiculture,

to the cultivator, grower or producer of such articles, produce or products;

f. where the payment is made for the purchase of the products manufactured or processed without the aid of power in a cottage industry, to the producer of such products;

g. where the payment is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town;

h. where any payment is made to an employee of the assessee or the heir of any such employee, on or in connection with the retirement, retrenchment, resignation, discharge or death of such employee, on account of gratuity, retrenchment compensation or similar terminal benefit and the aggregate of such sums payable to the employee or his heir does not exceed fifty thousand rupees;

i. where the payment is made by an assessee by way of salary to his employee after deducting the income-tax from salary in accordance with the provisions of section 192 of the Act, and when such employee—

(i) is temporarily posted for a continuous period of fifteen days or more in a place other than his normal place of duty or on a ship; and

(ii) does not maintain any account in any bank at such place or ship;

j. 58[***]

k. where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person;

l. where the payment is made by an authorised dealer or a money changer against purchase of foreign currency or travellers cheques in the normal course of his business.

Explanation.—For the purposes of this clause, the expressions “authorised dealer” or “money changer” means a person authorised as an authorised dealer or a money changer to deal in foreign currency or foreign exchange under any law for the time being in force.]

Notes:

⁵⁴ Substituted for “Cases and circumstances in which a payment or aggregate of payments exceeding twenty thousand rupees may be made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft.” by the IT (Third Amdt.) Rules, 2020, w.e.f. 29-1-2020.

⁵⁵ Substituted for “account payee bank draft, exceeds twenty thousand rupees” by the IT (Third Amdt.) Rules, 2020, w.e.f. 29-1-2020. 56-57. Omitted by the IT (Third Amdt.) Rules, 2020, w.e.f. 29-1-2020.

⁵⁶ Omitted by the IT (Third Amdt.) Rules, 2020, w.e.f. 29-1-2020.

Rule – 6DDA

Conditions that a stock exchange is required to fulfil to be notified as a recognised stock exchange for the purposes of clause (d) of proviso to clause (5) of section 43.

6DDA. For the purposes of clause (d) of proviso to clause (5) of section 43, a stock exchange shall fulfil the following conditions in respect of trading in derivatives, namely :—

(i) the stock exchange shall have the approval of the Securities and Exchange Board of India established under the Securities and Exchange Board of India Act, 1992 (15 of 1992) in respect of trading in derivatives and shall function in accordance with the guidelines or conditions laid down by the Securities and Exchange Board of India;

(ii) the stock exchange shall ensure that the particulars of the client (including unique client identity number and PAN) are duly recorded and stored in its databases;

(iii) the stock exchange shall maintain a complete audit trail of all transactions (in respect of cash and derivative market) for a period of seven years on its system;

(iv) the stock exchange shall ensure that transactions (in respect of cash and derivative market) once registered in the system are not erased;

(v) the stock exchange shall ensure that the transactions (in respect of cash and derivative market) once registered in the system are modified only in cases of genuine error and maintain data regarding all transactions (in respect of cash and derivative market) registered in the system which have been modified and submit a monthly statement in Form No. 3BB to the Director General of Income-tax (Intelligence), New Delhi within fifteen days from the last day of each month to which such statement relates.

Rule – 6DDB

Notification of a recognised stock exchange for the purposes of clause (d) of proviso to clause (5) of section 43.

6DDB. (1) An application for notification of a stock exchange as a recognised stock exchange for the purposes of clause (d) of proviso to clause (5) of section 43 may be made to the ⁵⁹[Member (Income Tax)], Central Board of Direct Taxes, North Block, New Delhi – 110001.

(2) The application referred to in sub-rule (1) shall be accompanied with the following documents, namely :—

(i) approval granted by Securities and Exchange Board of India for trading in derivatives;

(ii) up-to-date rules, bye-laws and trading regulations of the stock exchange;

(iii) confirmation regarding fulfilling the conditions referred to in clause (ii) to clause (v) of rule 6DDA;

(iv) such other information as the stock exchange may like to place before the Central Government.

(3) The Central Government may call for such other information from the applicant as it deems necessary for taking a decision on the application.

(4) The Central Government, after examining the information furnished by the stock exchange under sub-rule (2) or sub-rule (3), shall notify the stock exchange as a recognised stock exchange for the purposes of clause (d) of proviso to clause (5) of section 43 or issue an order rejecting the application before the expiry of four months from the end of the month in which the application is received.

(5) The notification referred to in sub-rule (4) shall be effective until the approval granted by the Securities and Exchange Board of India is withdrawn or expired, or the notification is rescinded by the Central Government.

Note:

⁵⁹ Substituted for “Member (L)” by the IT (Third Amdt.) Rules, 2017, w.e.f. 23-3-2017

Rule – 6DDC

Conditions that a recognised association is required to fulfil to be notified as a recognised association for the purposes of clause (e) of the proviso to clause (5) of section 43.

6DDC. For the purposes of clause (e) of the proviso to clause (5) of section 43, a recognised association shall fulfil the following conditions in respect of trading in derivatives, namely:—

(i) the recognised association shall have the approval of the Forward Markets Commission established under the Forward Contracts (Regulation) Act, 1952 (74 of 1952) in respect of trading in derivatives and shall function in accordance with the guidelines or conditions laid down by the Forward Markets Commission;

(ii) the recognised association shall ensure that the particulars of the client (including unique client identity number and PAN) are duly recorded and stored in its databases;

(iii) the recognised association shall maintain a complete audit trail of all transactions (in respect of derivative market) for a period of seven years on its system;

(iv) the recognised association shall ensure that transactions (in respect of derivative market) once registered in the system are not erased;

(v) the recognised association shall ensure that the transactions (in respect of derivative market) once registered in the system are modified only in cases of genuine error and maintain data regarding all transactions (in respect of derivative market) registered in the system which have been modified and submit a monthly statement in Form No. 3BC to the Director General of Income-tax (Intelligence and Criminal Investigation), New Delhi within fifteen days from the last day of each month to which such statement relates.

Rule – 6DDD

Notification of a recognised association for the purposes of clause (e) of the proviso to clause (5) of section 43.

6DDD. (1) An application for notification of a recognised association (as per clause (j) of section 2 of the Forward Contracts (Regulation) Act, 1952) as a recognised association for the purposes of clause (e) of the proviso to clause (5) of section 43 may be made to the ⁶⁰[Member (Income Tax)], Central Board of Direct Taxes, North Block, New Delhi.

(2) The application referred to in sub-rule (1) shall be accompanied with the following documents, namely :—

(i) approval granted by Forward Markets Commission for trading in derivatives;

(ii) up-to-date rules, bye-laws and trading regulations of the recognised association;

(iii) confirmation regarding fulfilling the conditions referred to in clause (ii) to clause (v) of rule 6DDC;

(iv) such other information as the recognised association may like to place before the Central Government.

(3) The Central Government may call for such other information from the applicant as it deems necessary for taking a decision on the application.

(4) The Central Government, after examining the information furnished by the recognised association under sub-rule (2) or sub-rule (3), shall notify the recognised association as a recognised association for the purposes of clause (e) of the proviso to clause (5) of section 43 or issue an order rejecting the application before the expiry of four months from the end of the month in which the application is received.

(5) The notification referred to in sub-rule (4) shall be effective until the approval granted by the Forward Markets Commission is withdrawn or expired, or the notification is rescinded by the Central Government.

Rule – 6EA

Special provision regarding interest on bad and doubtful debts of financial institutions, banks, etc.

6EA. The provisions of section 43D shall apply in the case of every public financial institution, scheduled bank, State financial corporation and State industrial investment corporation where its income by way of interest pertains to the following categories of bad and doubtful debts, namely:—

(a) (i) Non-viable or sticky advances, e., where irregularities of the nature specified in sub-clause (ii) are noticed in the accounts of the borrowers for a period of six months and more and there are no minimum prospects of regularisation of accounts, or where the accounts or information in relation to such accounts reflect usual signs of sickness, such as,—

1. apparent stagnation in the business as a result of the slow or negligible turnover;

2. frequent requests for overdrawing or issue of cheques without ensuring availability of funds in the account;

3. bills purchased or discounted remain overdue for 3 months and more or the recovery of such bills from the borrower poses difficulties;

4. in the case of term-loans, instalments which are overdue for 6 months or more;

5. unexplained delays by the borrower in submission of quarterly or half-yearly operating statements or stock statements or balance sheets and other information required by the bank;

6. slow movement or stagnation of stocks observed during inspections;

7. low or negligible level of activity observed during inspections or suspension or closure of the business;

8. persistent delay in compliance with vital requirements like execution of documents, producing additional security when required or non- compliance with such requirements;

9. diversion of funds to sister units or acquiring capital assets not relevant to the business or large personal withdrawals by the borrowers;

10. intentional non-adherence to project schedules leading to sub-stantial cost escalations and requirement of additional term-finance;

11. the pressure on the liquidity leading to non-payment of wages to workers or statutory dues or rents of office and factory premises;

12. the current liabilities exceeding current assets;

13. any grave irregularities observed by the auditors of the borrowers which remain to be rectified;

14. basic weakness revealed by the financial statements of the unit, for example, continued cash loss beyond one year.

(ii) The irregularities referred to in sub-clause (i) in the accounts of the borrowers are,—

1. where the accounts are overdrawn beyond the drawing power or the sanctioned limit, for a temporary period;

2. instalments in respect of term-loans are overdue for less than 6 months or import bills under letters of credit or instalments under deferred payment carried are overdue for less than 3 months;

3. bills not exceeding 10% to 15% of the total outstandings in the bills purchased or discounted account of the borrower are overdue for payment for a period of less than 3 months and refund in respect of unpaid bills is not forthcoming immediately.

(b) Advances recalled, e., where the repayment is highly doubtful and revival of the unit is not considered worthwhile and a decision has been taken to recall the advances.

(c) Suit-filed accounts, e., where legal action or recovery proceedings have been initiated and suits are pending for recovery of advances.

(d) Decreed debts, e., where suits have been filed and decree obtained and such decree is pending for execution.

(e) Debts recoverability whereof has become doubtful on account of shortfalls in value of security, difficulty in enforcing and realising the securities, or inability or unwillingness of the borrower to repay the banks dues, partly or wholly, and such debts have not been included in preceding clauses (a) to (d).

Rule – 6EB

Categories of bad or doubtful debts in the case of a public company under clause (b) of section 43D.

6EB. The provisions of clause (b) of section 43D shall apply in the case of every public company where its income by way of interest pertains to the following categories of bad and doubtful debts, namely :—

(a)(i) doubtful asset, that is, a debt which has remained a non-performing asset of the nature specified in sub-clause (ii) for a period exceeding two years;

(ii) non-performing asset referred to in sub-clause (i) shall be the following :—

1. term loan beyond one year, if the interest amount remains “past due” for six months or instalment is overdue for more than six months;

2. lease rental or hire purchase instalment, if the rental or the instalment is “past due” for six months;

3. bill purchased or discounted, if the bill remains overdue and unpaid for six months; or

4. any other credit facility in the nature of short term loan or advance [other than those referred to in (1), (2) and (3) above], if any amount to be received in respect of such a facility remains “past due” for a period of six months;

(b) loss asset, that is, a debt which has been identified as loss and considered as uncollectible but has not been written off in the accounts of the assessee.

Explanation.—For the purposes of this rule, an amount shall be deemed to be “past due” when it remains unpaid for thirty days beyond the due date.

Rule – 6F

CC.—Books of account

Books of account and other documents to be kept and maintained under section 44AA(3) by persons carrying on certain professions.

6F. (1) Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or authorised representative or film artist shall keep and maintain the books of account and other documents specified in sub-rule (2) :

Provided that nothing in this sub-rule shall apply in relation to any previous year in the case of any person if his total gross receipts in the profession do not exceed one lakh fifty thousand rupees in any one of the three years immediately preceding the previous year, or, where the profession has been newly set up in the previous year, his total gross receipts in the profession for that year are not likely to exceed the said amount.

(2) The books of account and other documents referred to in sub-rule (1) shall be the following, namely:—

i. a cash book;

ii. a journal, if the accounts are maintained according to the mercantile system of accounting;

iii. a ledger;

iv. carbon copies of bills, whether machine numbered or otherwise serially numbered, wherever such bills are issued by the person, and carbon copies or counterfoils of machine numbered or otherwise serially numbered receipts issued by him:

Provided that nothing in this clause shall apply in relation to sums not exceeding twenty-five rupees;

v. original bills wherever issued to the person and receipts in respect of expenditure incurred by the person or, where such bills and receipts are not issued and the expenditure incurred does not exceed fifty rupees, payment vouchers prepared and signed by the person:

Provided that the requirements as to the preparation and signing of payment vouchers shall not apply in a case where the cash book maintained by the person contains adequate particulars in respect of the expenditure incurred by him.

Explanation.—In this rule,—

(a) “authorised representative” means a person who represents any other person, on payment of any fee or remuneration before any Tribunal or authority constituted or appointed by or under any law for the time being in force, but does not include an employee of the person so represented or a person carrying on legal profession or a person carrying on the profession of accountancy;

(b) “cash book” means a record of all cash receipts and payments, kept and maintained from day-to-day and giving the cash balance in hand at the end of each day or at the end of a specified period not exceeding a month;

(c) “film artist” means any person engaged in his professional capacity in the production of a cinematograph film whether produced by him or by any other person, as—

i. an actor;

ii. a cameraman;

iii. a director, including an assistant director;

iv. a music director, including an assistant music director;

v. an art director, including an assistant art director;

vi. a dance director, including an assistant dance director;

vii. an editor;

viii. a singer;

ix. a lyricist;

x. a story writer;

xi. a screen-play writer;

xii. a dialogue writer; and

xiii. a dress designer.

(3) A person carrying on medical profession shall, in addition to the books of account and other documents specified in sub-rule (2), keep and maintain the following, namely :—

i. a daily case register in Form No. 3C;

ii. an inventory under broad heads, as on the first and the last day of the previous year, of the stock of drugs, medicines and other consumable accessories used for the purpose of his profession.

(4) The books of account and other documents specified in sub-rule (2) and sub-rule (3) other than those relating to a previous year which has come to an end

shall be kept and maintained by the person at the place where he is carrying on the profession or, where the profession is carried on in more places than one, at the principal place of his profession:

Provided that where the person keeps and maintains separate books of account in respect of each place where the profession is carried on, such books of account and other documents may be kept and maintained at the respective places at which the profession is carried on.

(5) The books of account and other documents specified in sub-rule (2) and sub-rule (3) shall be kept and maintained for a period of six years from the end of the relevant assessment year:

Provided that where the assessment in relation to any assessment year has been reopened under section 147 of the Act within the period specified in section 149 of the Act, all the books of account and other documents which were kept and maintained at the time of reopening of the assessment shall continue to be so kept and maintained till the assessment so reopened has been completed.

(6) Notwithstanding anything contained in sub-rules (1) to (3), it shall not be necessary for any person carrying on any of the professions specified in sub-rule (1) to keep and maintain the books of account and other documents specified in sub-rule (2) or sub-rule (3) in relation to any previous year commencing before the first day of March, 1983.

Rule – 6G

CCC.—Reports of audit of accounts of persons carrying on business or profession

Report of audit of accounts to be furnished under section 44AB.

6G. (1) The report of audit of the accounts of a person required to be furnished under section 44AB shall,—

(a) in the case of a person who carries on business or profession and who is required by or under any other law to get his accounts audited, be in Form No. 3CA;

(b) in the case of a person who carries on business or profession, but not being a person referred to in clause (a), be in Form No. 3CB.

(2) The particulars which are required to be furnished under section 44AB shall be in Form No. 3CD.

⁶¹[(3) The report of audit furnished under this rule may be revised by the person by getting revised report of audit from an accountant, duly signed and verified by such accountant, and furnish it before the end of the relevant assessment year for which the report pertains, if there is payment by such person after furnishing of report under sub-rules (1) and (2) which necessitates recalculation of disallowance under section 40 or section 43B.]

Note:

⁶¹ Inserted by the IT (Eighth Amdt.) Rules, 2021, w.e.f. 1-4-2021.

Rule – 7A

Income from the manufacture of rubber.

7A. (1) Income derived from the sale of centrifuged latex or cenex or latex based crepes (such as pale latex crepe) or brown crepes (such as estate brown crepe, remilled crepe, smoked blanket crepe or flat bark crepe) or technically specified block rubbers manufactured or processed from field latex or coagulum obtained from rubber plants grown by the seller in India shall be computed as if it were income derived from business, and thirty-five per cent of such income shall be deemed to be income liable to tax.

(2) In computing such income, an allowance shall be made in respect of the cost of planting rubber plants in replacement of plants that have died or become permanently useless in an area already planted, if such area has not previously been abandoned, and for the purpose of determining such cost, no deduction shall be made in respect of the amount of any subsidy which, under the provisions of clause (31) of section 10, is not includible in the total income.

Rule – 7B

Income from the manufacture of coffee.

7B. (1) Income derived from the sale of coffee grown and cured by the seller in India shall be computed as if it were income derived from business, and twenty-five per cent of such income shall be deemed to be income liable to tax.

(1A) Income derived from the sale of coffee grown, cured, roasted and grounded by the seller in India, with or without mixing chicory or other flavouring ingredients, shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax.

Explanation.—For the purposes of sub-rules (1) and (1A) “curing” shall have the same meaning as assigned to it in clause (d) of section 3 of the Coffee Act, 1942 (7 of 1942).

(2) In computing the incomes referred to in sub-rules (1) and (1A), an allowance shall be made in respect of the cost of planting coffee plants in replacement of plants that have died or become permanently useless in an area already planted, if such area has not previously been abandoned, and for the purpose of determining such cost, no deduction shall be made in respect of the amount of any subsidy which, under the provisions of clause (31) of section 10, is not includible in the total income.

Rule – 8

Income from the manufacture of tea.

8. (1) Income derived from the sale of tea grown and manufactured by the seller in India shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax.

(2) In computing such income an allowance shall be made in respect of the cost of planting bushes in replacement of bushes that have died or become permanently useless in an area already planted, if such area has not previously been abandoned, and for the purpose of determining such cost, no deduction shall be made in respect of the amount of any subsidy which, under the provisions of clause (30) of section 10, is not includible in the total income.

Rule – 8B

Guidelines for notification of zero coupon bond.

8B. (1) An application by an infrastructure capital company or 69[infrastructure capital fund or infrastructure debt fund] or a public sector company for notification under clause (48) of section 2 of any zero coupon bond proposed to be issued by it shall be made in Form No. 5B at least three months before the date of issue of such bond:

[Provided that an application shall not be made for notification of a bond which is to be issued beyond a period of two financial years following the financial year in which such application is made:

Provided further that an application made in Form No. 5B shall be disposed of within a period of six months from the date of receipt of such application.]

(2) Every application, under sub-rule (1), shall be accompanied by the following documents, namely:—

[(i) where the application is made by any infrastructure capital company or infrastructure debt fund or a public sector company, being a Government company defined under clause (45) of section 2 of the Companies Act, 2013 (18 of 2013), a copy of certificate of incorporation under the Companies Act, 2013 (18 of 2013);]

(ii) where the application is made by any infrastructure capital fund, a copy of the trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908);

(iii) where the application is made by a public sector company, being any corporation, established by or under any Central or State or Provincial Act, a copy of the relevant Act.

(3) The Central Government, while specifying a zero coupon bond by notification in the Official Gazette shall satisfy itself that the following conditions are fulfilled, namely:—

(i) the period of life of the bond is not less than ten years and not more than twenty years;

(ii) the infrastructure capital company or [infrastructure capital fund or infrastructure debt fund] or public sector company proposing to issue a zero 72 coupon bond has an investment grade rating from at least two credit rating agencies registered under sub-section (1A) of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(iii) necessary arrangement has been made by the infrastructure capital company or [infrastructure capital fund or infrastructure debt fund] or public sector company for listing the zero coupon bond in a recognised stock exchange in India;

(iv) where the application is made by the infrastructure capital company or [infrastructure capital fund or infrastructure debt fund], such company or fund 72 shall furnish along with the application an undertaking that the money realised on issue of the zero coupon bond shall be invested by it in the following manner, namely:—

i. twenty-five per cent or more of such realisation before the end of the financial year immediately following the financial year in which the bond is issued;

ii. the balance of such realisation within a period of four financial years immediately following the financial year in which the bond is issued;

(v) where the application is made by a public sector company, such company shall furnish along with the application an undertaking that the money realised on issue of the zero coupon bond shall be invested or utilised by it in the following manner, namely:—

(i) fifteen per cent or more of such realisation before the end of the financial year immediately following the financial year in which the bond is issued;

(ii) the balance of such realisation within a period of six financial years immediately following the financial year in which the bond is issued; ⁷³[(vi) where the application is made by an infrastructure debt fund, such fund shall along with the application, submit an undertaking that a sinking fund shall be maintained for the interest which will accrue on all the zero coupon bonds subscribed and such interest shall be invested in Government security as defined under clause (f) of section 2 of the Government Securities Act, 2006 (38 of 2006).]

(4) The Central Government, after having satisfied itself about fulfilling of the conditions referred to in sub-rule (1), sub-rule (2) and sub-rule (3) shall specify the bond, by notification in the Official Gazette, giving therein, inter alia, the following particulars, namely:—

a. name of the bond;

b. period of life of the bond;

c. the time schedule of the issue of the bond;

d. the amount to be paid on maturity or redemption of the bond;

e. the discount;

f. the number of bonds to be issued.

(5) The Central Government may, if the applicant fails to fulfil the conditions referred to in sub-rule (1) or sub-rule (2) or sub-rule (3), reject the application for notification after giving an opportunity of being heard to the infrastructure capital company or [infrastructure capital fund or infrastructure debt fund] or 74 public sector company, as the case may be.

75 [(6) Every infrastructure capital company or infrastructure capital fund or infrastructure debt fund or public sector company shall submit within two months from the end of each financial year referred to in sub-clause (i) or sub-clause (ii) of clause (iv) of sub-rule (3), or, as the case may be, in sub-clause (i) or sub-clause (ii) of clause (v) of sub-rule (3), a certificate from an accountant as defined in the Explanation to sub-section (2) of section 288, specifying the amount invested in each year in Form No. 5BA.]

(7) The Central Government shall have the power to withdraw the notification if the applicant fails to fulfil any of the conditions referred to in sub-rule (3) or sub-rule (6).

Explanation.— 76[***]

77 [(8) The application in Form No. 5B referred to in sub-rule (1) and the certificate of accountant in Form No. 5BA referred to in sub-rule (6) shall be furnished electronically either under digital signature or electronic verification code.

(9) The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) shall specify the procedures, formats and standards for ensuring secure capture and transmission of data and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to furnishing of Form No. 5B and Form No. 5BA.

Explanation.—For the purposes of this rule, the expressions,—

i. “discount” and “period of life of the bond” shall have the same meanings respectively assigned to them in clause (i) and clause (ii) of the Explanation to clause (iiia) of sub-section (1) of section 36;

ii. “electronic verification code” means a code generated for the purpose of electronic verification of the person furnishing the return of income as per the data structure and standards specified by Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems);

iii. “infrastructure debt fund” shall mean the infrastructure debt fund notified by the Central Government in the Official Gazette under clause (47) of section 10 of the Act.]

Notes:

⁶⁹ Substituted for “infrastructure capital fund” by the IT (Eighth Amdt.) Rules, 2022, w.e.f. 6-4-2022.

⁷⁰ Substituted by the IT (Eighth Amdt.) Rules, 2022, w.e.f. 6-4-2022.

⁷¹ Substituted by the IT (Eighth Amdt.) Rules, 2022, w.e.f. 6-4-2022.

⁷² Substituted for “infrastructure capital fund” by the IT (Eighth Amdt.) Rules, 2022, w.e.f. 6-4-2022.

⁷³ Inserted by the IT (Eighth Amdt.) Rules, 2022, w.e.f. 6-4-2022.

⁷⁴ Substituted for “infrastructure capital fund” by the IT (Eighth Amdt.) Rules, 2022, w.e.f. 6-4-2022.

⁷⁵ Substituted by the IT (Eighth Amdt.) Rules, 2022, w.e.f. 6-4-2022.

⁷⁶ Omitted by the IT (Eighth Amdt.) Rules, 2022, w.e.f. 6-4-2022.

⁷⁷ Inserted by the IT (Eighth Amdt.) Rules, 2022, w.e.f. 6-4-2022.

Rule – 8C

Computation of pro rata amount of discount on a zero coupon bond for the purpose of clause (iiia) of sub-section (1) of section 36.

8C. For the purposes of clause (iiia) of sub-section (1) of section 36, the pro rata amount of discount on a zero coupon bond shall be computed in the following manner, namely:—

(a) the period of life of the bond shall be converted into number of calendar months and, for this purpose, where the calendar month in which the bond is issued or the bond matures or is redeemed contains a part of a calendar month then, if such part is fifteen days or more than fifteen days, it shall be increased to one calendar month and if such part is less than fifteen days it shall be ignored;

(b) the amount of discount shall be divided by the number of calendar months determined in accordance with clause (a);

(c) where one or more than one calendar month out of calendar months determined in accordance with clause (a) is or are included in a previous year, the amount determined in accordance with clause (b) shall be multiplied by the number of calendar months so included and the amount so arrived at shall be taken to be the pro rata amount of discount for that previous year.

Rule – 8D

Method for determining amount of expenditure in relation to income not includible in total income.

8D. (1) Where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with—

(a) the correctness of the claim of expenditure made by the assessee; or

(b) the claim made by the assessee that no expenditure has been incurred,

in relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2).

⁷⁸[(2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely:—

(i) the amount of expenditure directly relating to income which does not form part of total income; and

(ii) an amount equal to one per cent of the annual average of the monthly averages of the opening and closing balances of the value of investment, income from which does not or shall not form part of total income:

Provided that the amount referred to in clause (i) and clause (ii) shall not exceed the total expenditure claimed by the assessee.]

(3) ⁷⁹[***]]

Notes:

⁷⁸ Substituted by the IT (Fourteenth Amdt.) Rules, 2016, w.e.f. 2-6-2016.

⁷⁹ Omitted by the IT (Fourteenth Amdt.) Rules, 2016, w.e.f. 2-6-2016.

Rule – 9A

Deduction in respect of expenditure on production of feature films.

9A. (1) In computing the profits and gains of the business of production of feature films carried on by a person (the person carrying on such business hereafter in this rule referred to as film producer), the deduction in respect of the cost of production of a feature film certified for release by the Board of Film Censors in a previous year shall be allowed in accordance with the provisions of sub-rule (2) to sub-rule (4).

Explanation.— In this rule,—

i. “Board of Film Censors” means the Board of Film Censors constituted under the Cinematograph Act, 1952 (37 of 1952);

ii. “cost of production”, in relation to a feature film, means the expenditure incurred on the production of the film, not being—

a. the expenditure incurred for the preparation of the positive prints of the film; and

b. the expenditure incurred in connection with the advertisement of the film after it is certified for release by the Board of Film Censors:

Provided that the cost of production of a feature film, shall be reduced by the subsidy received by the film producer under any scheme framed by the Government, where such amount of subsidy has not been included in computing the total income of the assessee for any assessment year.

(2) Where a feature film is certified for release by the Board of Film Censors in any previous year and in such previous year,—

(a) the film producer sells all rights of exhibition of the film, the entire cost of production of the film shall be allowed as a deduction in computing the profits and gains of such previous year; or

(b) the film producer—

i. himself exhibits the film on a commercial basis in all or some of the areas; or

ii. sells the rights of exhibition of the film in respect of some of the areas; or

iii. himself exhibits the film on a commercial basis in certain areas and sells the rights of exhibition of the film in respect of all or some of the remaining areas,

and the film is released for exhibition on a commercial basis at least ninety days before the end of such previous year, the entire cost of production of the film shall be allowed as a deduction in computing the profits and gains of such previous year.

(3) Where a feature film is certified for release by the Board of Film Censors in any previous year and in such previous year, the film producer—

a. himself exhibits the film on a commercial basis in all or some of the areas; or

b. sells the rights of exhibition of the film in respect of some of the areas; or

c. himself exhibits the film on a commercial basis in certain areas and sells the rights of exhibition of the film in respect of all or some of the remaining areas,

and the film is not released for exhibition on a commercial basis at least ninety days before the end of such previous year, the cost of production of the film in so far as it does not exceed the amount realised by the film producer by exhibiting the film on a commercial basis or the amount for which the rights of exhibition are sold or, as the case may be, the aggregate of the amounts realised by the film producer by exhibiting the film and by the sale of the rights of exhibition, shall be allowed as a deduction in computing the profits and gains of such previous year; and the balance, if any, shall be carried forward to the next following previous year and allowed as a deduction in that year.

(4) Where, during the previous year in which a feature film is certified for release by the Board of Film Censors, the film producer does not himself exhibit the film on a commercial basis or does not sell the rights of exhibition of the film, no deduction shall be allowed in respect of the cost of production of the film in computing the profits and gains of such previous year; and the entire cost of production of the film shall be carried forward to the next following previous year and allowed as a deduction in that year.

(5) Notwithstanding anything contained in the foregoing provisions of this rule, the deduction under this rule shall not be allowed unless,—

(a) in a case where the film producer—

i. has himself exhibited the feature film on a commercial basis; or

ii. has sold the rights of exhibition of the feature film; or

iii. has himself exhibited the feature film on a commercial basis in some areas and has sold the rights of exhibition of the feature film in respect of all or some of the remaining areas,

the amount realised by exhibiting the film, or the amount for which the rights of exhibition have been sold or, as the case may be, the aggregate of such amounts, is credited in the books of account maintained by him in respect of the year in which the deduction is admissible;

(b) in a case where the film producer has transferred the rights of exhibition of the feature film on a minimum guarantee basis, the minimum amount guaranteed and the amount, if any, received or due in excess of the guaranteed amount or where the film producer follows cash system of accounting, the amount received towards the minimum guarantee and the amount, if any, received in excess of the guaranteed amount, are credited in the books of account maintained by him in respect of the year in which the deduction is admissible.

(6) Where the Assessing Officer is of opinion that—

a. the rights of exhibition of the feature film have been transferred by the film producer by a mode not covered by the provisions of this rule; or

b. having regard to the facts and circumstances of any case, it is not practicable to apply the provisions of this rule to such case, deduction in respect of the cost of production of the film may be allowed by the Assessing Officer in such other manner as he may deem suitable.

(7) For the purposes of this rule,—

i. the sale of the rights of exhibition of a feature film includes the lease of such rights or their transfer on a minimum guarantee basis;

ii. the rights of exhibition of a feature film shall be deemed to have been sold only on the date when the positive prints of the film are delivered by the film producer to the purchaser of such rights or where in terms of the agreement between the film producer and the film distributor as defined in rule 9B, the positive prints are to be made by the film distributor, the date on which the negative of the film is delivered by the film producer to the film distributor.

(8) Nothing contained in this rule shall apply in relation to any assessment year commencing before the 1st day of April, 1987.

Rule – 9B

Deduction in respect of expenditure on acquisition of distribution rights of feature films.

9B. (1) In computing the profits and gains of the business of distribution of feature films carried on by a person (the person carrying on such business hereafter in this rule referred to as film distributor), the deduction in respect of the cost of acquisition of a feature film shall be allowed in accordance with sub-rule (2) to sub-rule (4).

Explanation.—For the purposes of this rule, “cost of acquisition”, in relation to a feature film, means the amount paid by the film distributor to the film producer or to another distributor under an agreement entered into by the film distributor with such film producer or such other distributor, as the case may be for acquiring the rights of exhibition and, where the rights of exhibition have been acquired on a minimum guarantee basis, the minimum amount guaranteed, not being—

i. the amount of expenditure incurred by the film distributor for the preparation of the positive prints of the film; and

ii. the expenditure incurred by him in connection with the advertisement of the film.

(2) Where a feature film is acquired by the film distributor in any previous year and in such previous year—

a. the film distributor sells all rights of exhibition of the film, the entire cost of acquisition of the film shall be allowed as a deduction in computing the profits and gains of such previous year; or

b. the film distributor,—

i. himself exhibits the film on a commercial basis in all or some of the areas; or

ii. sells the rights of exhibition of the film in respect of some of the areas; or

iii. himself exhibits the film on a commercial basis in certain areas and sells the rights of exhibition of the film in respect of all or some of the remaining areas,

and the film is released for exhibition on a commercial basis at least ninety days before the end of such previous year, the entire cost of acquisition of the film shall be allowed as a deduction in computing the profits and gains of such previous year.

(3) Where a feature film is acquired by the film distributor in any previous year and in such previous year the film distributor—

a. himself exhibits the film on a commercial basis in all or some of the areas; or

b. sells the rights of exhibition of the film in respect of some of the areas; or

c. himself exhibits the film on a commercial basis in certain areas and sells the rights of exhibition of the film in respect of all or some of the remaining areas,

and the film is not released for exhibition on a commercial basis at least ninety days before the end of such previous year, the cost of acquisition of the film in so far as it does not exceed the amount realised by the film distributor by exhibiting the film on a commercial basis or the amount for which the rights of exhibition have been sold or, as the case may be, the aggregate of the amounts realised by the film distributor by exhibiting the film and by the sale of the rights of exhibition, shall be allowed as a deduction in computing the profits and gains of such previous year; and the balance, if any, shall be carried forward to the next following previous year and allowed as a deduction in that year.

(4) Where during the previous year in which a feature film is acquired by the film distributor, he does not himself exhibit the film on a commercial basis or does not sell the rights of exhibition of the film, no deduction shall be allowed in respect of the cost of acquisition of the film in computing the profits and gains of such previous year; and the entire cost of acquisition shall be carried forward to the next following previous year and allowed as a deduction in that year.

(5) Notwithstanding anything contained in the foregoing provisions of this rule, the deduction under this rule shall not be allowed unless—

a. in a case where the film distributor,—

i. has himself exhibited the feature film on a commercial basis; or

ii. has sold the rights of exhibition of the feature film; or

iii. has himself exhibited the feature film on a commercial basis in some areas and has sold the rights of exhibition of the feature film in respect of all or some of the remaining areas,

the amount realised by exhibiting the film, or the amount for which the rights of exhibition have been sold, or, as the case may be, the aggregate of such amounts, is credited in the books of account maintained by him in respect of the year in which the deduction is admissible;

b. in a case where the film distributor has transferred the rights of exhibition of the feature film on a minimum guarantee basis, the minimum amount guaranteed and the amount, if any, received or due in excess of the guaranteed amount, or where the film distributor follows cash system of accounting, the amount received towards the minimum guarantee and the amount, if any, received in excess of the guaranteed amount, are credited in the books of account maintained by him in respect of the year in which the deduction is admissible.

(6) For the purposes of this rule,—

i. the sale of the rights of exhibition of a feature film includes the lease of such rights or their transfer on a minimum guarantee basis ;

ii. the rights of exhibition of a feature film shall be deemed to have been sold only on the date when the positive prints of the film are delivered by the film distributor to the purchaser of such rights ;

iii. distributor shall include a sub-distributor.

(7) Nothing contained in this rule shall apply in relation to any assessment year commencing before the 1st day of April, 1987.

Rule – 10

Determination of income in the case of non-residents.

10. In any case in which the Assessing Officer is of opinion that the actual amount of the income accruing or arising to any non-resident person whether directly or indirectly, through or from any business connection in India or through or from any property in India or through or from any asset or source of income in India or through or from any money lent at interest and brought into India in cash or in kind cannot be definitely ascertained, the amount of such income for the purposes of assessment to income-tax may be calculated:—

(i) at such percentage of the turnover so accruing or arising as the Assessing Officer may consider to be reasonable, or

(ii) on any amount which bears the same proportion to the total profits and gains of the business of such person (such profits and gains being computed in accordance with the provisions of the Act), as the receipts so accruing or arising bear to the total receipts of the business, or

(iii) in such other manner as the Assessing Officer may deem suitable.

Rule – 11UA

Determination of fair market value.

11UA. (1) For the purposes of section 56 of the Act, the fair market value of a property, other than immovable property, shall be determined in the following manner, namely,—

(a) valuation of jewellery,—

i. the fair market value of jewellery shall be estimated to be the price which such jewellery would fetch if sold in the open market on the valuation date;

ii. in case the jewellery is received by the way of purchase on the valuation date, from a registered dealer, the invoice value of the jewellery shall be the fair market value;

iii. in case the jewellery is received by any other mode and the value of the jewellery exceeds rupees fifty thousand, then assessee may obtain the report of registered valuer in respect of the price it would fetch if sold in the open market on the valuation date;

(b) valuation of archaeological collections, drawings, paintings, sculptures or any work of art,—

i. the fair market value of archaeological collections, drawings, paintings, sculptures or any work of art (hereinafter referred as artistic work) shall be estimated to be price which it would fetch if sold in the open market on the valuation date;

ii. in case the artistic work is received by the way of purchase on the valuation date, from a registered dealer, the invoice value of the artistic work shall be the fair market value;

iii. in case the artistic work is received by any other mode and the value of the artistic work exceeds rupees fifty thousand, then assessee may obtain the report of registered valuer in respect of the price it would fetch if sold in the open market on the valuation date;

(c) valuation of shares and securities,—

(a) the fair market value of quoted shares and securities shall be determined in the following manner, namely,—

i. if the quoted shares and securities are received by way of transaction carried out through any recognized stock exchange, the fair market value of such shares and securities shall be the transaction value as recorded in such stock exchange;

ii. if such quoted shares and securities are received by way of transaction carried out other than through any recognized stock exchange, the fair market value of such shares and securities shall be,—

a. the lowest price of such shares and securities quoted on any recognized stock exchange on the valuation date, and

b. the lowest price of such shares and securities on any recognized stock exchange on a date immediately preceding the valuation date when such shares and securities were traded on such stock exchange, in cases where on the valuation date there is no trading in such shares and securities on any recognized stock exchange;

⁷⁶[(b) the fair market value of unquoted equity shares shall be the value, on the valuation date, of such unquoted equity shares as determined in the following manner, namely:—

the fair market value of unquoted equity shares = (A + B + C + D – L) x (PV)/(PE), where,

A = book value of all the assets (other than jewellery, artistic work, shares, securities and immovable property) in the balance sheet as reduced by,

i. any amount of income-tax paid, if any, less the amount of income-tax refund claimed, if any; and

ii. any amount shown as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset;

B = the price which the jewellery and artistic work would fetch if sold in the open market on the basis of the valuation report obtained from a registered valuer;

C = fair market value of shares and securities as determined in the manner provided in this rule;

D = the value adopted or assessed or assessable by any authority of the Government for the purpose of payment of stamp duty in respect of the immovable property;

L = book value of liabilities shown in the balance sheet, but not including the following amounts, namely:—

i. the paid-up capital in respect of equity shares;

ii. the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date of transfer at a general body meeting of the company;

iii. reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation;

iv. any amount representing provision for taxation, other than amount of income-tax paid, if any, less the amount of income-tax claimed as refund, if any, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;

v. any amount representing provisions made for meeting liabilities, other than ascertained liabilities;

vi. any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares;

PV = the paid-up value of such equity shares;

PE = total amount of paid-up equity share capital as shown in the balance sheet;]

(c) the fair market value of unquoted shares and securities other than equity shares in a company which are not listed in any recognized stock exchange shall be estimated to be price it would fetch if sold in the open market on the valuation date and the assessee may obtain a report from a merchant banker or an accountant in respect of such valuation.

⁷⁷[(2) Notwithstanding anything contained in sub-clause (b) or sub-clause (c), as the case may be, of clause (c) of sub-rule (1): —

(A) the fair market value of unquoted equity shares for the purposes of sub-clause (i) of clause (a) of the Explanation to clause (vllb) of sub-section (2) of section 56 shall be the value, on the valuation date, of such unquoted equity shares, as shall be determined under sub-clause (a), sub-clause (b), sub-clause (c) or sub-clause (e), at the option of the assessee , where the consideration received by the assessee is from a resident ; and under sub-clauses

(a) to (e) at the option of the assessee, where the consideration received by the assessee is from a non-resident, in the following manner:—

(a) the fair market value of unquoted equity shares = (A-L) x 1^–PV/PE), where,

A = book value of the assets in the balance-sheet as reduced by any amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act and any amount shown in the balance-sheet as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset;

L = book value of liabilities shown in the balance-sheet, but not including the following amounts, namely:—

i. the paid-up capital in respect of equity shares;

ii. the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date of transfer at a general body meeting of the company;

iii. reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation;

iv. any amount representing provision for taxation, other than amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;

v. any amount representing provisions made for meeting liabilities, other than ascertained liabilities;

vi. any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares;

PE = total amount of paid up equity share capital as shown in the balance-sheet;

PV = the paid up value of such equity shares; or

(b) the fair market value of the unquoted equity shares determined by a merchant banker as per the Discounted Free Cash Flow method;

(c) where any consideration is received by a venture capital underta- king for issue of unquoted equity shares, from a venture capital fund or a venture capital company or a specified fund, the price of the equity shares corresponding to such consideration may, at the option of such undertaking, be taken as the fair market value of the equity shares to the extent the consideration from such fair market value does not exceed the aggregate consideration that is received from a venture capital fund or a venture capital company or a specified fund :

Provided that the consideration has been received by the undertaking from a venture capital fund or a venture capital company or a specified fund, within a period of ninety days before or after the date of issue of shares which are the subject matter of valuation.

Explanation.—For the purposes of this clause,—

(i) “specified fund” shall have the same meaning as assigned to it in clause (aa) of Explanation to clause (viib) of sub-section (2) of section 56;

(ii) “venture capital company”, “venture capital fund” and “venture capital undertaking” shall have the same meaning assigned to them in clause (b) of Explanation to clause (viib) of sub-section (2) of section 56.

Illustration: If a venture capital undertaking receives a consideration of fifty thousand rupees from a venture capital company for issue of one hundred shares at the rate of five hundred rupees per share, then such an undertaking can issue one hundred shares at this rate to any other investor within a period of ninety days before or after the receipt of consideration from venture capital company;

(d) the fair market value of the unquoted equity shares determined by a merchant banker in accordance with any of the following methods:

(i) Comparable Company Multiple Method;

(ii) Probability Weighted Expected Return Method;

(iii) Option Pricing Method;

(iv) Milestone Analysis Method;

(v) Replacement Cost Methods;

(e) where any consideration is received by a company for issue of unquoted equity shares, from any entity notified under clause (ti) of the first proviso to clause (viib) of sub-section (2) of section 56, the price of the equity shares corresponding to such consideration may, at the option of such company, be taken as the fair market value of the equity shares to the extent the consideration from such fair market value does not exceed the aggregate consideration that is received from the notified entity:

Provided that the consideration has been received by the company from the entity notified under clause (ti) of the first proviso to clause (viib) of sub-section (2) of section 56, within a period of ninety days before or after the date of issue of shares which are the subject matter of valuation;

(B) the fair market value of compulsorily convertible preference shares for the purposes of sub-clause 0) of clause (a) of the Explanation to clause (viib) of sub-section (2) of section 56 shall be the value, on the valuation date, as determined—

(i) in accordance with the provisions of sub-clause (b), sub-clause (c), or sub-clause (e) of clause (A), at the option of the assessee, or based on the fair market value of unquoted equity shares determined in accordance with sub-clause (a), sub-clause (b), sub-clause (c), or sub-clause (e) of clause (A), at the option of the assessee, where such consideration is received from a resident; and

(ii) in accordance with the provisions of sub-clauses (b) to (e) of clause (A), at the option of the assessee, or based on the fair market value of unquoted equity shares determined in accordance with sub-clauses (a) to (e) of clause (A), at the option of the assessee, where such consideration is received from a non-resident.

(3) Where the date of valuation report by the merchant banker for the purposes of sub-rule (2) is not more than ninety days prior to the date of issue of shares which are the subject matter of valuation, such date may, at the option of the assessee, be deemed to be the valuation date:

Provided that where such option is exercised under this sub-rule, the provisions of clause (j) of rule 11 U shall not apply.

(4) For the purposes of clause (A) or clause (B) of sub-rule (2), where the issue price of the shares exceeds the value of shares as determined in accordance with —

(i) sub-clause (a) or sub-clause (b) of clause (A), for consideration received from a resident, by an amount not exceeding ten per cent of the valuation price, the issue price shall be deemed to be the fair market value of such shares;

(ii) sub-clause (a) or sub-clause (b) or sub-clause (d) of clause (A), for consideration received from a non-resident, by an amount not exceeding ten per cent of the valuation price, the issue price shall be deemed to be the fair market value of such shares.

Explanation.—For the purposes of this sub-rule, ‘issue price’ means the consideration received by the company for one share.]

Notes:

⁷⁶ Substituted by the IT (Twentieth Amdt.) Rules, 2017, w.e.f. 1-4-2018 and shall apply in relation to assessment year 2018-19 and subsequent years.

⁷⁷ Sub-rules (2) to (4) substituted for sub-rule (2) by the IT (Twenty-first Amdt.) Rules, 2023, w.e.f. 25-9-2023.

Rule – 18AB

69[Furnishing of statement of particulars and certificate under clause (viii) and clause (ix) of sub-section (5) of section 80G or under sub-section (1A) of section 35.

18AB. (1) For the purpose of clause (viii) of sub-section (5) of section 80G and clause (i) of sub-section (1A) of section 35, the prescribed authority shall be the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) as the case may be.

(2) Statement of particulars required to be furnished by any research association, university, college or other institution or company or fund (hereinafter referred to as reporting person) under clause (viii) of sub-section (5) of section 80G or under clause (i) of sub-section (1A) of section 35 shall be furnished in respect of each financial year, beginning with the financial year 2021-22, in Form No. 10BD and shall be verified in the manner indicated therein.

(3) The reporting person, referred to in sub-rule (2), shall, while aggregating the amounts for determining the sums received for reporting in respect of any person,—

(i) take into account all the donations of the same nature paid by that person during the financial year; and

(ii) proportionately attribute the value of the donation or the aggregated value of all the donations to all the persons, in a case where the donation is recorded in the name of more than one person and where no proportion is specified by the donors, attribute equally to all the donors.

(4) Form No. 10BD, shall be furnished electronically,—

(i) under digital signature, if the return of income is required to be furnished under digital signature;

(ii) through electronic verification code in a case not covered under clause (i).

(5) Form No. 10BD shall be verified by the person who is authorised to verify the return of income under section 140, as applicable to the assessee.

(6) The reporting person shall furnish the certificate as referred to in clause (ix) of sub-section (5) of section 80G or in clause (ii) of sub-section (1A) of section 35, to the donor in Form No. 10BE specifying the amount of donation received during financial year from such donor, beginning with the financial year 2021- 22.

(7) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall—

(i) lay down the,—

a. data structure, standards and procedure of furnishing and verification of Form No. 10BD, single or multiple;

b. the procedure to submit correction statement for rectification of any mistake or to add, delete or update the information furnished in Form No. 10BD; and

c. the procedure, formats and standards for the purposes of generation and download of certificates in Form No. 10BE;

(ii) be responsible for,—

a. formulating and implementing appropriate security, archival and retrieval policies in relation to the Form No.10BD so furnished; and

b. the day-to-day administration in relation to the generation and download of certificates in Form No. 10BE, from the web portal specified by him or the person authorised by him.

(8) The certificate referred to in sub-rule (6) is required to be furnished to the donor on or before the 31st May, immediately following the financial year in which the donation is received.

(9) Form No. 10BD referred to in sub-rule (1) shall be furnished on or before the 31st May, immediately following the financial year in which the donation is received].

Note:

⁶⁹ Inserted by the IT (Sixth Amdt.) Rules, 2021, w.e.f. 1-4-2021.

Rule – 21ACA

¹[Conditions and activities for the Finance Company located in any International Financial Services Centre for section 94B.

21ACA. (1) For the purposes of clause (iv) of sub-section (5) of section 94B, the Finance Company located in any International Financial Services Centre shall only carry out one or more of the following activities, namely:-

(i) lending in the form of loans, commitments and guarantees, credit enhancement, securitisation, financial lease;

(ii) factoring and forfaiting of receivables; or

(iii) functions of Global or Regional Corporate Treasury Centre such as borrowings, lending, hedging of currency or commodity risk or investments, cash management, structured credit, intra group financing, financial budgeting and similar other such treasury services and activities.

(2) The interest being paid by such Finance Company, being the borrower, in respect of any debt issued by a non-resident, shall be in foreign currency.

Explanation.—For the purposes of this rule, the expressions—

(i) “Finance Company” means a finance company as defined in clause (e) of sub-regulation (1) of regulation 2 of the International Financial Services Centres Authority (Finance Company) Regulations, 2021 made under the International Financial Services Centres Authority Act, 2019 (50 of 2019); and

(ii) “International Financial Services Centre” shall have the meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005).]

Note:

¹ Inserted by the IT (Second Amdt.) Rules, 2025, w.e.f. 27-1-2025.

Rule – 75

Limits for contributions.

75 (1) Where an employee of a company owns shares in the company with a voting power exceeding ten per cent of the whole of such power, the sum of the contributions of the employee and employer to the recognized provident fund maintained by the company shall not exceed Rs. 250 in any month.

(2) For the purpose of clause (a) of sub-rule (4) of rule 5 of Part A of the Fourth Schedule the employer’s aggregate contribution in any year, including the normal contribution, to the individual account of any one employee whose salary does not exceed five hundred rupees per mensem shall not exceed double the amount of the contribution of the employee in that year.

(3) The amount of the periodical bonuses and other contributions of a contingent nature which may be credited by an employer in any year under clause (b) of sub-rule (4) of rule 5 of Part A of the Fourth Schedule to the individual account of any one employee shall not exceed the amount of the contributions of the employee in that year :

Provided, however, that the above limit shall not apply to bonus contributions made by an employer under an award by an Industrial Tribunal or under an order of a Court or under an agreement with the employees’ union(s) to the individual accounts of employees whose salary does not exceed Rs. 500 per month.

Rule – 87

Ordinary annual contributions.

87. The ordinary annual contribution by the employer to a fund in respect of any particular employee shall not exceed twenty-seven per cent of his salary for each year as reduced by the employer’s contribution, if any, to any provident fund (whether recognised or not) in respect of the same employee for that year.

Rule – 121A

52[Form of statement to be furnished by producers of cinematograph films or persons engaged in specified activity.

121A. (1) The statement required to be furnished under section 285B by a person carrying on production of cinematograph film or engaged in specified activity, or both, shall be in Form No. 52A for each previous year.

(2) Form No. 52A shall be furnished within sixty days from the end of the previous year.

(3) For the purpose of section 285B, the prescribed authority shall be the Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, or any person authorised by the Principal Director General of Income-tax (Systems) or Director General of Income- tax (Systems).

(4) Form No. 52A, shall be furnished electronically,—

(i) under digital signature, if the return of income is required to be furnished under digital signature;

(ii) through electronic verification code in a case not covered under clause (i).

(5) The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems), as the case may be, shall,—

(6) specify the procedures, formats and standards for the purposes of furnishing and verification of Form No. 52A;

(7) be responsible for the day-to-day administration in relation to furnishing and verification of Form No. 52A; and

(8) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to Form No. 52A.

(9) The Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems), as the case may be, or any person authorised by the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems) shall forward Form No. 52A to the Assessing Officer.

Explanation.—For the purposes of this rule, “specified activity” shall have the same meaning as assigned to it in the Explanation to section 285B of the Act.]

Note:

⁵² Substituted by the IT (Thirtieth Amdt.) Rules, 2022, w.e.f. 14-9-2022.

Income Tax Forms

Form No. : 1

¹[Appendix IV

FORM NO. 1

[See rule 11UE (1)]

Undertaking under sub-rule (1) of rule 11UE of the Income-tax Rules, 1962

To,
Principal Commissioner/Commissione
………………….. ………………………. ……………………

Sir/Madam,

I …………………………………….. (name in block letters) son/daughter of …………………………………………. designation ………………………………….. and nationality …………………………………. and related passport number………………………………….. (hereinafter referred to as “signatory”) having Permanent Account Number/Aadhaar Number (see Note 1) …………………………………………………………………. on behalf of ………………………………………… (name of the declarant) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number (see Note 2) ……………………………………….. and being duly authorised and competent to represent the declarant in this regard pursuant to Board Resolution and legal authorisation (see Note 3), as the case may be ,hereby declare as follows:

a. That specified orders have been passed or made in respect of income accruing or arising through or from the transfer of an asset or a capital asset situate in India in consequence of the transfer of a share or interest in a company or entity registered or incorporated outside India made before the 28th day of May, 2012 and particulars of such specified orders are provided in Part A of the Annexure.

b. The declarant has (strike off the options that are not applicable),

i. not filed any appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings constituted under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant orders, and hereby undertakes that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such relevant order or orders are provided in Part B of the Annexure;

ii. filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant orders and has irrevocably withdrawn, on a with prejudice basis, all such appeals or applications or petitions or proceeding and evidence thereof is furnished herewith and hereby undertakes that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and irrevocably withdrawn with prejudice by the declarant, are provided in Part C of the Annexure;

iii. filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and all the appeals or applications or petitions or proceeding filed by the declarant have been disposed of and no further appeal or application or petition or proceeding has been filed by the declarant and evidence thereof is furnished herewith and hereby undertake that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and disposed of, are provided in Part C of the Annexure;

iv. filed appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant orders and one or more of such appeals or applications or petitions or proceeding are pending as on the date of this undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such appeals or applications or petitions or proceeding that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e) below. The declarant further undertakes that it shall not file any such appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such pending appeals or applications or petitions or proceeding filed by the declarant and their status as on the date of this undertaking, are provided in Part D of the Annexure;

c. The declarant has (strike off the options that are not applicable),

i. not initiated any proceeding for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant orders, and hereby undertakes that it shall not initiate any such arbitration, conciliation or mediation in future. Particulars of such relevant order or orders are provided in Part B of the Annexure;

ii. initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and has irrevocably, on a with prejudice basis, withdrawn any such proceeding for arbitration, conciliation or mediation, and notices given thereof and evidence thereof is furnished herewith. The declarant hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and irrevocably withdrawn with prejudice by the declarant, are provided in Part E of the Annexure;

iii. initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and all the arbitration, conciliation or mediation filed by the declarant have been disposed of and no further proceeding has been initiated by the declarant and evidence thereof is furnished herewith. The declarant hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and disposed of, are provided in Part E of the Annexure;

iv. initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and one or more of such proceeding or notices are pending on the date of undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such proceeding or notices for arbitration, conciliation or mediation that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e) below. Particulars of such pending proceeding and notices filed by the declarant are provided in Part F of the Annexure. The declarant hereby further undertakes that it shall not initiate any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders;

v. received or got any awards, orders, judgments or any other reliefs issued in favour of the declarant, arising out of or in any way relating to the imposition of tax, interest and penalty based on the relevant order or orders, under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise and hereby undertakes to irrevocably waive any right to seek or pursue any claim or costs or declaratory relief in relation to or arising out of such awards, orders or judgments or any other relief that may have been ordered, issued or passed against India and any Indian affiliate, whether it is in proceeding initiated by the declarant or by India and any Indian affiliate. The declarant also undertakes to irrevocably waive any right to seek or pursue any claim for costs or relief in respect of any proceeding initiated by the Republic of India to set aside such award, order or judgment or any other relief issued in favour of the declarant. The declarant hereby undertakes that it shall not initiate or file any such arbitration, conciliation or mediation in future. Particulars of such awards, orders, judgment or any other relief are provided in Part G of the Annexure;

.d. The declarant has (strike off the options that are not applicable),

i. not initiated any proceeding to enforce or pursue attachments in connection with any awards, orders, judgments, any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant as referred in clause (c) of this undertaking either against the Republic of India and any Indian affiliate, and hereby undertakes that it shall not initiate any such proceeding in future. Particulars of such award, order or judgment are provided in Part B of the Annexure;

ii. initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgments or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. The declarant has irrevocably and with prejudice withdrawn or discontinued any such proceeding and hereby undertakes that it shall not reopen any such proceeding in future or file or initiate fresh proceeding to enforce or pursue attachments and evidence thereof is furnished herewith. Particulars of such proceeding, initiated and withdrawn or discontinued by the declarant, are provided in Part H of the Annexure;

iii. initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgments or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. All such proceeding filed by the declarant have been disposed of and no further proceeding has been filed by the declarant and evidence is herewith furnished and hereby undertakes that it shall not reopen any such proceeding in future or file or initiate fresh proceeding to enforce or pursue attachments. Particulars of such proceeding, initiated and disposed of, are provided in Part H of the Annexure;

iv. initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgments, or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant as referred to in clause (c) of this undertaking, either against the Republic of India and any Indian affiliate and one or more of such proceeding are pending on the date of undertaking and, the declarant has obtained one or more orders from any court or other authority which remain outstanding against India and any Indian Affiliate. The declarant hereby undertakes that it shall not file in future any such proceeding to enforce or pursue attachments regarding any awards, orders, judgments, or any other relief that may have been ordered , issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant as referenced in clause (c) of this undertaking or to enforce the orders from any court or other authority which remain outstanding against Republic of India and any Indian Affiliate. The declarant further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to such outstanding order, in order to set-aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. Particulars of such proceeding are provided in Part I of the Annexure. The declarant also undertakes to irrevocably withdraw, terminate and discontinue with prejudice any and all such proceeding to enforce or pursue attachments in accordance with clause (e).

e. The declarant hereby undertakes as follows:

i. to irrevocably and with prejudice withdraw, discontinue, terminate and take all necessary steps to irrevocably and with prejudice close the pending proceeding referred in sub-clause (iv) of clause (b), sub-clause (iv) of clause (c), sub-clause (v) of clause (c) and sub-clause (iv) of clause (d) of this undertaking, as well as any other pending proceeding against India or Indian affiliates relating to the relevant order or orders and not referenced in clauses (b), (c) and (d) above, and not to pursue in any way and by any means in future the pending proceeding as referenced in clauses (b), (c), and (d) above, and any other pending proceeding relating to the relevant order or orders not referred in the above clauses and any other fresh proceeding relating to the relevant order or orders. In so acting, declarant shall act in accordance with this undertaking and in full cooperation with the Republic of India;

ii. to irrevocably terminate, release, discharge, and forever irrevocably waive any right, whether direct or indirect, and any claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, declaratory reliefs and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown previously (or in future discovered), suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist , in relation to any award, order, judgment, or any other relief as referred in clauses (b), (c) and (d) of this undertaking, against the Republic of India and all Indian affiliates, ordered, issued or passed in connection with the relevant order or orders, whether it is in proceeding initiated by the declarant or by Republic of India and any Indian Affiliate. The declarant further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to any outstanding order referenced in clause (d), in order to set-aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. For the avoidance of doubt, the declarant’s irrevocable waiver includes irrevocable waiver of any right provided by any existing ex parte, provisional, or other kind of court order permitting enforcement or attachment against the Republic of India and any Indian affiliate, in furtherance of any award, order judgment, or any other relief that may have been ordered or issued or passed by any arbitral tribunal as referred in clauses (b), (c) and (d) above. For further avoidance of doubt, the declarant also undertakes to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by Republic of India and any Indian affiliate to set aside such award, order or judgement ordered, issued or passed in favour of the declarant. Such irrevocable waiver includes, but is not limited to, any right under any relevant ex parte order;

iii. to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by the Republic of India to set aside such award, order or judgment, or any other relief issued in favour of the declarant.

f. The declarant specifically represents that all Parts of the Annexure as described in this undertaking are full and complete to the best of its knowledge.

g. The declarant hereby undertakes to irrevocably terminate, release, discharge and forever irrevocably waive any right, whether direct or indirect, and any remedies, claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, compensation, and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist, based on pursuit of any remedy or any and all claims, demands, damages, judgments, awards, costs, expenses, compensation or liabilities of any kind (whether asserted or unasserted) in relation to any facts, events, or omissions occurring from the beginning of time to the date of this undertaking and thereafter in future in relation to taxation of said income or relevant order or orders, or any related award, judgment or court order, which may otherwise be available to the declarant under any law for the time being in force, in equity, under any statute or under any agreement entered into by Republic of India with any country or territory outside Republic of India, whether for protection of investment or otherwise , whether it is in proceeding initiated by the declarant or by Republic of India and any Indian affiliate. For the avoidance of doubt, the declarant’s above waiver includes an irrevocable waiver of any claim against India and any Indian Affiliate to costs incurred or interest accrued in relation to the relevant order or orders, or any related ongoing or completed litigation, arbitration, conciliation or mediation. Moreover, for the avoidance of any doubt, the declarant hereby undertakes (for itself and on behalf of all related parties) to forgo any reliance on any right under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders.

h. The declarant further represents that as of the date of this undertaking, it has not transferred any of its claims under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders, or granted any rights, to third parties, and further undertakes to not transfer any of its claims to third parties after entering this undertaking. Where any such claim or right is transferred, the declarant confirms that it has provided the particulars of all the interested parties in Part L, and the undertakings from each of such interested parties is attached with this undertaking in accordance with Part M of the Annexure.

i. In the event that, notwithstanding the foregoing, any person asserts, brings, files or maintains any claim against the Republic of India or Indian affiliates (hereinafter collectively referred to as “releasees”) at any time on or after the date of furnishing this undertaking, the declarant shall indemnify, defend and hold harmless such releasees from and against any and all costs, expenses (including attorney’s fees and court’s fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of such claim. The declarant specifically represents that, to the best of its knowledge, after—

i. the execution of this undertaking;

ii. the execution of any separate related undertaking by any other party in connection with the relevant order or orders; and

iii. irrevocable withdrawal of all pending proceeding as outlined in this undertaking, no other claim regarding the said relevant order or orders referenced above, or any related award, judgment, or court order, shall remain outstanding against the Republic of India or any Indian affiliates. To avoid any doubt, the declarant’s indemnity of releasees under this clause shall include any claim brought by any third party alleging that it has obtained the declarant’s claims under an award, judgment or court order or the relevant order or orders. An indemnity bond to this effect is attached in Part N of the undertaking.

j. For the removal of any doubt, the declarant fully assumes the risk through the indemnity in clause (i) of any omission or mistake with respect to securing releasees against any related claim by any person. If the declarant fails to obtain any release from such person, the declarant warrants that it will indemnify the Republic of India or any Indian affiliates from any defense costs, court costs, and damages. An indemnity bond to the effect of clauses (i) and (j) is annexed to the undertaking.

k. The declarant further undertakes to refrain from facilitating, procuring, encouraging or otherwise assisting any person (including but not limited to any related party or interested party) from bringing any proceeding or claims of any kind referred to in the above clauses, or any proceeding or claim of any kind related to any relevant order or orders referred to above (whether in respect of tax, interest or penalty). The declarant shall notify by a public notice or press release, at any time before furnishing intimation in Form No. 3 where this Form is required to be furnished under rule 11UF and before furnishing this undertaking in other cases, that by signing this undertaking any claims arising out of or relating to the relevant order or orders or any related award, judgment or court order, no longer subsist. Such public notice or press release shall include, among other things, confirmation that,—

i. the declarant (and its related parties) forever irrevocably forgo any reliance on any right and provisions under any award, judgment or court order pertaining to the relevant order or orders or under the relevant order or orders;

ii. the declarant has provided this undertaking, which includes a complete release of the Republic of India and any Indian Affiliates with respect to any award, judgment or court order pertaining to the relevant order or orders or under the relevant order or orders, and with respect to any claim pertaining to the relevant order or orders;

iii. the undertaking also includes an indemnity against any claims brought against the Republic of India or any India affiliate, including by related parties or interested parties, contrary to the release; and

iv. the declarant confirms it will treat any such award, judgment or court order as null and void and without legal effect to the same extent as if it had been set aside by a competent court and will not take any action or initiate any proceeding or bring any claim based on that.

l. The declarant confirms that the undertakings given herein are intended to be enforceable by the Republic of India, including so as to secure the irrevocable waiver, withdrawal or discontinuance (as appropriate) of all the proceeding and claims referred to in any of the clauses of this undertaking.

m. The declarant represents and warrants that:

i. it has full legal power and authority to execute and deliver this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j)under applicable law;

ii. the execution, delivery and performance of this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j) has been duly authorised by all necessary corporate action, including but not limited to any board resolution or similar authorisation under applicable law (see Note 3);

iii. this undertaking constitutes the legal, valid and binding obligation of the declarant, enforceable against the declarant in accordance with its terms;

iv. such authorisations described in the above sub-clauses (i), (ii) and (iii) are effective under applicable law, and to this end, letters from local counsel in the relevant jurisdictions are attached to this undertaking which confirm the legality of such authorisations under applicable law.

n. The declarant confirms that by submitting the present undertaking, it fulfills the conditions specified in the Explanation below the sixth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9.

o. The details of the bank account in which the refund may be credited are provided in Part J of the Annexure.

p. The details of all the interested parties are provided in Part K and Part L of the Annexure. The undertaking in Part M of the Annexure by each of such persons is attached with this undertaking. The declarant represents and warrants that:

i. all such undertakings have been executed and delivered by the person who has full legal power and authority to execute and deliver such undertakings;

ii. the execution, delivery and performance of this undertaking has been duly authorised by all necessary corporate action; and

iii. this undertaking constitutes the legal, valid and binding obligation of the declarant, enforceable against such person in accordance with its terms. Such separate, related undertakings may take the same form as this undertaking.

q. The declarant is or is not covered under sub-rule (6) of rule 11UF and in case if the declarant is not covered under said sub-rule all the conditions provided under sub-rule (2) of rule 11UE have been fulfilled.

r. This undertaking is governed by relevant Indian law and any dispute with respect to this undertaking shall be subject to Indian laws and be decided in accordance with the procedures specified in the Act under the exclusive jurisdiction of the relevant income-tax authorities, tribunals or courts in Republic of India, as the case may be, which are empowered to decide disputes under the Act.

I also confirm that I am aware of all the consequences and implications of this undertaking.

Place:…………………………………

Signature:………………………………….

Date: …………………………………………………………………………………………………………………………….

Attachments

1. The Board Resolution or legal authorisation, as the case may be, as referred to in clause (m) of the undertaking

2. An indemnity bond to the effect of clause (i) and clause (j) of the undertaking attached in Part N of the undertaking.

3. Copy of the public notice referred to in clause (k) of the undertaking, where Form No. 3 is not required to be furnished under sub-rule (6) of rule 11UF.

4. Attachments as required in different parts of the Annexure to this undertaking.

Notes

1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.

2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number or Aadhaar Number or Tax Deduction Account Number of the declarant are not available.

3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking shall, among other things:

a. record the signatory’s power and authority to give the undertaking on behalf of the declarant; and

b. record the declarant’s power and authority to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking.

VERIFICATION

Verified that the contents of this undertaking are true to the best of my knowledge and belief. No part of the undertaking is false and nothing has been concealed or misstated therein.

Verified at________________ place_______________ on this the_________ day________________ of ______ month_______________ , year .

Place: ……………………

Date:……………………..

Signature…………………………

 

Annexure

Part A– Particulars of the relevant order or orders:

Sl. No.	Assessment Year or Financial year	Income-tax Authority passing the order	Details of the order under consideration		Taxes or penalty determined	Interest	Total demand	Relief, provided in any appeal proceeding , if any	Demand recovered from the declarant	Pending demand or refund due as on date	Details of the attachments made by any Income-tax Authority
			Section and sub-section of the Income-tax Act, 1961	Date of order
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)

Part B– Particulars of the relevant order or orders covered by sub-clause (i) of clauses (b), (c) and (d) of the undertaking:

Sl. No.	Sl. No. in Part A where the relevant order is mentioned	No appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court has been filed(refer clause (b)(i) of the undertaking).	No proceeding has been initiated for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise (refer clause (c)(i) of the undertaking).	No proceeding initiated to enforce or pursue attachments in connection with any award, order or judgment, any other relief that may have been ordered or issued or passed by any tribunal or court or other judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the declarant against the Republic of India and Indian affiliates (refer clause (d)(i) of the undertaking).
(1)	(2)	(3)	(4)	(5)
		Applicable or Not applicable	Applicable or Not applicable	Applicable or Not applicable

Part C: Particulars of the appeals or applications or petitions or proceeding under sub-clauses (ii) and (iii) of clause (b) of the undertaking:

Sl. No.	Sl. No. in Part A where the relevant order is mentioned	Nature of appeals or applications or petitions or proceeding	Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed	Date of filing the appeals or applications or petitions or proceeding	Date of disposing of or withdrawal such appeals or applications or petitions or proceeding (Please attach a copy of order by the Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court accepting the withdrawal or disposing of)
(1)	(2)	(3)	(4)	(5)	(6)

Part D – Particulars of the appeals or applications or petitions or proceeding under sub-clause (iv) of clauses (b) of the undertaking:

Sl. No.	Sl. No. in Part A where the relevant order is mentioned	Nature of appeals or applications or petitions or proceeding	Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed	Date of filing the appeals or applications or petitions or proceeding
(1)	(2)	(3)	(4)	(5)

Part E – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clause (ii) and (iii) of clause (c) of the undertaking:

Sr. No.	Sl. No in Part A where the relevant order is mentioned	Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given	Particulars (including the name of the country) where such proceeding for arbitration, conciliation or mediation are pending or notices thereof have been issued	Date of initiating the proceeding for arbitration, conciliation or mediation/issue of notice	Name of the agreement entered into by India under which the proceeding for arbitration, conciliation or mediation are pending	Status of the proceeding for arbitration, conciliation or mediation	Date of disposing of or withdrawal of such proceeding for arbitration, conciliation or mediation, or notices (Please attach evidence of such disposing of or withdrawal, including order of the Tribunal or court or other judicial or quasi-judicial or administrative authority).
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)

Part F – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clause (iv) of clause (c) of the undertaking:

Sl. No.	Sl. No in Part A where the relevant order is mentioned	Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given	Particulars (including the name of the country where such proceeding for arbitration, conciliation or mediation are pending or notices thereof have been issued)	Date of initiating the proceeding for arbitration, conciliation or mediation/issue of notice	Name of the agreement entered into by India under which proceeding for arbitration, conciliation or mediation are pending	Status of the proceeding for arbitration, conciliation or mediation
(1)	(2)	(3)	(4)	(5)	(6)	(7)

Part G – Particulars of the award, order or judgment or any other relief under sub-clause (v) of clause (c) of the undertaking:

Sl. No.	Sl. No. in Part A where the relevant order is mentioned	Nature of such award, order or judgment or any other relief	Particulars (including the name of the country) where proceeding related to such award, order, judgment or any other relief were held	Date of such award, order, judgment or any other relief along with reference number	Status of the award, order, judgment or any other relief
(1)	(2)	(3)	(4)	(5)	(6)

Part H – Particulars of the proceeding to enforce any award, order or judgment or any other relief under sub-clauses (ii) and (iii) of clause (d) of the undertaking:

Sl. No.	Sl. No. in Part A where the relevant order is mentioned	Nature of proceeding to enforce such award, order or judgment or any other relief	Particulars (including the name of the country where such proceeding to enforce any award, order or judgment or any other relief are taking place)	Date of filing proceeding to enforce any award, order or judgment or any other relief	Nature of such award, order or judgment or any other relief (Attach copy thereof)	Status of the proceeding to enforce such award, order or judgment or any other relief	Date of disposing of or withdrawal of proceeding to enforce such award, order or judgment or any other relief (Please attach a copy of evidence of such disposing of/withdrawal, including order of the Court or other judicial authority)
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)

Part I – Particulars of the proceeding to enforce any award, order or judgment or any other relief under sub-clause (iv) of clause (d) of the undertaking:

Sl. No.	Sl. No in Part A where the relevant order is mentioned	Nature of proceeding to enforce such award, order or judgment or any other relief	Particulars (including the name of the country where such proceeding to enforce any award, order or judgment or any other relief are taking place)	Date of filing proceeding to enforce any award, order or judgment or any other relief	Nature of such award, order or judgment or any other relief (Attach copy thereof)	Status of the proceeding to enforce such award, order or judgment or any other relief
(1)	(2)	(3)	(4)	(5)	(6)	(7)

Part J – Details of bank account in Republic of India to which the refund is to be remitted

Sl. No.	Bank Name and Address	Account Number and other required details for remittance
(1)	(2)	(3)

Part K– Details of all the companies or entities in the entire chain of holding of the declarant till the ultimate holding company or entity of the declarant:

Sl. No.	Name of holding company	Percentage of the ownership by such holding company in the declarant as on the date of undertaking	If the ownership in the declarant is not held directly by such holding company, the chain of ownership with the names of all the companies in the chain of ownership
(1)	(2)	(3)	(4)

Part L- Details of all the interested parties other than the interested parties covered under Part K

Sl. No.	Name of such persons whose interest may be affected directly or indirectly by this undertaking	Nature of interest of such person	Amount of interest of such person (Rs), if available
(1)	(2)	(3)	(4)

PART M Undertaking by person(s) declared in Part K and Part L of the Undertaking

To,
Principal Commissioner/Commissioner
……………….. ……………………… ………….

Sir/Madam,

I………………….. (name in block letters) son/daughter of…………………………………………….. designation ……………….. .and nationality …………………………. .and related passport number……………………………… (hereinafter referred to as “signatory”) having Permanent Account Number/Aadhaar Number (see Note 1) ………………………………. on behalf of …………………………………. . (name of the interested party) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number (see Note 2) …………………………………………. . and being duly authorised and competent to represent the interested party in this regard pursuant to Board Resolution and legal authorisation (see Note 3), as the case may be , hereby declare as follows:

(a) The particulars of specified orders that have been passed or made in respect of income accruing or arising through or from the transfer of an asset or a capital asset situate in India in consequence of the transfer of a share or interest in a company or entity registered or incorporated outside Republic of India made before the 28th day of May, 2012 in the case of declarant and the nature of interest of the interested party in such specified orders are provided in Part MA of the Annexure.

(b) The interested party has (strike off options that are not applicable):

i. not filed any appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders, and hereby undertakes that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such relevant order or orders are provided in Part MB of the Annexure;

ii. filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and has irrevocably, on a with prejudice basis, withdrawn all such appeals or applications or petitions or proceeding or such appeals or applications or petitions or proceeding have been disposed at any time before the date of filing Form No. 1, and hereby undertake that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and irrevocably withdrawn with prejudice by the interested party, are provided in Part MC of the Annexure.

iii. filed one or more appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and all the appeals or applications or petitions or proceeding filed by the interested party have been disposed of and no further appeal or application or petition or proceeding has been filed by the interested party and evidence thereof is furnished herewith and hereby undertake that it shall not file any appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such appeals or applications or petitions or proceeding filed and disposed of, are provided in Part MC of the Annexure.

iv. filed appeals or applications or petitions or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court against the relevant order or orders and one or more of such appeals or applications or petitions or proceeding are pending as on the date of this undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such appeals or applications or petitions or proceeding that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e) below. The interested party further undertakes that it shall not file any such appeal, application, petition or proceeding in future against the relevant order or orders. Particulars of such pending appeals or applications or petitions or proceeding filed by the interested party and their status as on the date of this undertaking, are provided in Part D of the Annexure. Particulars of any appeals or applications or petitions or proceeding as described in this clause (b) which are not covered by the sub-clauses (i) and (ii) are also provided in Part MD of the Annexure.

(c) The interested party has (strike off options that are not applicable):

i. not initiated any proceeding for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by Republic of India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders, and hereby undertakes that it shall not initiate any such arbitration, conciliation or mediation in future. Particulars of such relevant order or orders are provided in Part MB of the Annexure;

ii. initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and has irrevocably, on a with prejudice basis, withdrawn any such proceeding for arbitration, conciliation or mediation, and notices given thereof. The interested party hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and irrevocably withdrawn with prejudice by the interested party, are provided in Part ME of the Annexure.

iii. initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by Republic of India with any other country or territory outside India, whether for protection of investment or otherwise against the relevant order or orders and all the arbitration, conciliation or mediation filed by the interested party have been disposed of and no further proceeding has been initiated by the interested party and evidence thereof is furnished herewith. The interested party hereby undertakes that it shall not reopen in future any such proceeding or initiate or file any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of such proceeding for arbitration, conciliation or mediation and notices given thereof, initiated and disposed of, are provided in Part ME of the Annexure.

iv. has initiated proceeding for arbitration, conciliation or mediation, or notices thereof has been given, under any law for the time being in force or under any agreement entered into by Republic of India with any other country or territory outside Republic of India, whether for protection of investment or otherwise against the relevant order or orders and one or more of such proceeding or notices are pending on the date of undertaking and hereby undertakes to irrevocably withdraw, terminate and discontinue any and all such proceeding or notices for arbitration, conciliation or mediation that are pending as on the date of signing this undertaking, on a with prejudice basis, in accordance with clause (e). Particulars of such pending proceeding and notices filed by the interested party are provided in Part F of the Annexure. The interested party hereby further undertakes that it shall not initiate any such arbitration, conciliation or mediation in future arising out of or in connection with the relevant order or orders. Particulars of any proceeding for arbitration, conciliation or mediation, or notices thereof, which are not covered by the sub-clause (i) and sub- clause (ii), are also provided in Part MF of the Annexure.

v. received or got any awards, orders, judgements or any other reliefs issued in favour of the interested party, arising out of or in any way relating to the imposition of tax, interest and penalty based on the relevant order or orders, under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise and hereby undertakes to irrevocably waive any right to seek or pursue any claim or costs or declaratory relief in relation to or arising out of such awards, orders or judgments or any other relief that may have been ordered, issued or passed against India and any Indian affiliate, whether it is in proceeding initiated by the interested party or by India and any Indian affiliate. The interested party also undertakes to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by the Republic to set aside such award, order or judgment issued in favour of the interested party. The interested party hereby undertakes that it shall not initiate or file any such arbitration, conciliation or mediation in future. Particulars of such awards, orders, judgment or any other relief are provided in Part MG of the Annexure.

(d) The interested party has (strike off options that are not applicable):

i. not initiated any proceeding to enforce or pursue attachments in connection with any awards, orders, judgments, or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party as referred in clause (c) of this undertaking either against the Republic of India and any Indian affiliate, and hereby undertakes that it shall not initiate any such proceeding in future. Particulars of such award, order or judgment are provided in Part MB of the Annexure.

ii. initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgements or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. The interested party has irrevocably and with prejudice withdrawn or discontinued any such proceeding and hereby undertakes that it shall not reopen any such proceeding in future or file fresh proceeding to enforce or pursue attachments. Particulars of such proceeding, initiated and withdrawn or discontinued by the interested party, are provided in Part MH of the Annexure.

iii. initiated proceeding to enforce or pursue attachments in connection with any awards, orders, judgements or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party, as referred to in clause (c) of this undertaking against the Republic of India and any Indian affiliate. All such proceeding filed by the interested party have been disposed of and no further proceeding has been filed by the interested party and evidence is herewith furnished and hereby undertakes that it shall not reopen any such proceeding in future or file or initiate fresh proceeding to enforce or pursue attachments. Particulars of such proceeding, initiated and disposed of, are provided in Part MH of the Annexure.

iv. initiated proceeding to enforce or pursue attachments in respect of any awards, orders, judgments, or any other relief that may have been ordered, issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party as referred to in clause (c) of this undertaking, either against the Republic of India and any Indian affiliate and one or more of such proceeding are pending on the date of undertaking and, interested party has obtained one or more orders from any court or other authority which remain outstanding against India and any Indian affiliate. The interested party hereby undertakes that it shall not file in future any such proceeding to enforce or pursue attachments regarding any awards, orders, judgments, or any other relief that may have been ordered , issued or passed by any tribunal or court or other judicial, quasi-judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party as referenced in clause (c) of this undertaking or to enforce the orders from any court or other authority which remain outstanding against India and any Indian affiliate. The interested party further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to such outstanding order, in order to set-aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. Particulars of such proceeding, are provided in Part MI of the Annexure. Particulars of any such proceeding, to enforce or pursue attachments in connection with any awards, orders, judgments, or any other relief, which are not covered by the sub-clauses (i) and (ii), are also provided in Part MI of the Annexure. The interested party also undertakes to irrevocably withdraw, terminate and discontinue with prejudice any and all such proceeding to enforce or pursue attachments in accordance with clause (e) below.

(e) The interested party hereby undertakes as follows: –

i. to irrevocably and with prejudice withdraw, discontinue, terminate and take all necessary steps to irrevocably and with prejudice close the pending proceeding referred in sub-clause (iv) of clause (b), sub-clause (iv) of clause (c), sub-clause (v) of clause (c) and sub-clause (iv) of clause (d) of this undertaking, as well as any other pending proceeding against Republic of India or Indian affiliates relating to the relevant order or orders and not referenced in clauses (b), (c) and (d) above, and not to pursue in any way and by any means in future the pending proceeding as referenced in clauses (b), (c) and (d) and any other pending proceeding relating to the relevant order or orders not referred in the above clauses and any other fresh proceeding relating to the relevant order or orders. In so acting, interested party shall act in accordance with this undertaking and in full cooperation with the Republic of India.

ii. to irrevocably terminate, release, discharge, and forever irrevocably waive any right, whether direct or indirect, and any claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, declaratory reliefs, and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown previously (or in future discovered), suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist , in relation to any award, order, judgment, or any other relief as referred in clauses (b), (c) and (d) of this undertaking, against the Republic of India and all Indian affiliates, ordered, issued or passed in connection with the relevant order or orders, whether it is in proceeding initiated by the interested party or by India and any Indian affiliate. For the avoidance of doubt, the interested party’s irrevocable waiver includes irrevocable waiver of any right provided by any existing ex parte, provisional, or other kind of court order permitting enforcement or attachment against the Republic of India and any Indian affiliate, in furtherance of any award, order, judgment, or any other relief that may have been ordered or issued or passed by any arbitral tribunal as referred in clauses (b), (c) and (d). The interested party further undertakes to fully cooperate with the Republic of India or any Indian affiliate which is subject to any outstanding order referenced in clause (d), in order to set aside or otherwise nullify any such outstanding order, and irrevocably and with prejudice waives any rights or remedies arising from such outstanding order. For further avoidance of doubt, the interested party also undertakes to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by Republic of India and any Indian Affiliate to set aside such award, order or judgment ordered, issued or passed in favour of the interested party. Such irrevocable waiver includes, but is not limited to, any right under any relevant ex parte order.

iii. to irrevocably waive any right to seek or pursue any claim for costs in respect of any proceeding initiated by the Republic of India to set aside such award, order or judgment, or any other relief issued in favour of the interested party.

(f) The interested party specifically represents that all Parts of the Annexure as described in this undertaking are full and complete to the best of its knowledge.

(g) The interested party hereby undertakes to irrevocably terminate, release, discharge, and forever irrevocably waive any right, whether direct or indirect, and any remedies, claims, demands, liens, actions, suits, causes of action, obligations, controversies, debts, costs, attorneys’ fees, court’s fees, expenses, damages, judgments, orders, compensation and liabilities of whatever kind or nature at law, in equity, or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, which have existed or may have existed, or do exist or which hereafter can, shall or may exist, based on pursuit of any remedy or any and all claims, demands, damages, judgments, awards, costs, expenses, compensation or liabilities of any kind (whether asserted or unasserted) in relation to any facts, events, or omissions occurring from the beginning of time to the date of this undertaking and thereafter in future in relation to taxation of said income or relevant order or orders, or any related award, judgment or court order, which may otherwise be available to the interested party under any law for the time being in force, in equity, under any statute or under any agreement entered into by India with any country or territory outside India, whether for protection of investment or otherwise , whether it is in proceeding initiated by the interested party or by India and any Indian affiliate. For the avoidance of doubt, the interested party’s above waiver includes an irrevocable waiver of any claim against India and any Indian affiliate to costs incurred or interest accrued in relation to the relevant order or orders, or any related ongoing or completed litigation, arbitration, conciliation or mediation. Moreover, for the avoidance of any doubt, the interested party hereby undertakes to forgo any reliance on any right under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders.

(h) The interested party further represents that as of the date of this undertaking, it has not transferred any of its claims under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders, or granted any rights, to third parties, and further undertakes to not transfer any of its claims to third parties after entering this undertaking.

(i) In the event that, notwithstanding the foregoing, any person asserts, brings , files or maintains any claim against the Republic of India or Indian affiliates (hereinafter collectively referred to as “releasees”)at any time on or after the date of furnishing this undertaking, the interested party shall indemnify, defend and hold harmless such releasee from and against any and all costs, expenses (including attorneys’ fees and court’s fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of such claim. The interested party specifically represents that, to the best of its knowledge, after

i. the execution of this undertaking;

ii. the execution of any separate related undertaking by any other party in connection with the relevant order or orders; and

iii. irrevocable withdrawal of all pending proceeding as outlined in this undertaking.

no other claim regarding the said relevant order or orders referenced above, or any related award, judgment, or court order, shall remain outstanding against the Republic of India or any Indian affiliate. To avoid any doubt, the interested party’s indemnity of releasees shall include any claim brought by any third party alleging that it has obtained the interested party’s claims under an award, judgment or court order or the relevant order or orders. An indemnity bond to this effect is attached in Part N of the undertaking.

(j) For the avoidance of any doubt, the interested party fully assumes the risk through the indemnity in clause (i) of any omission or mistake with respect to securing releasees against any related claim by any person. If the interested party fails to obtain any release from such person, the interested party warrants that it will indemnify the Republic of India or any Indian affiliates from any defense costs, court costs, and damages. An indemnity bond to the effect of clauses (i) and (j) is annexed to the undertaking.

(k) The interested party further undertakes to refrain from facilitating, procuring, encouraging or otherwise assisting any party (including but not limited to any related party) from bringing any proceeding or claims of any kind referred to in the above clauses, or any proceeding or claim of any kind related to any relevant order or orders referred to above (whether in respect of tax, interest or penalty). The interested party shall notify by a public notice or press release, at any time before furnishing intimation in Form No. 3 where Form No. 3 is required to be furnished under rule 11UF and before furnishing this undertaking in other cases, that by signing this undertaking any claims arising out of or relating to the relevant order or orders or any related award, judgment or court order, no longer subsist. Such public notice shall include, among other things, confirmation that,-

i. the interested party forever irrevocably forgoes any reliance on any right and provisions under any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders;

ii. the interested party has provided this undertaking, which includes a complete release of the Republic of India and any Indian Affiliate with respect to any award, judgment, or court order pertaining to the relevant order or orders or under the relevant order or orders, and with respect to any claim pertaining to the relevant order or orders;

iii. the undertaking also includes an indemnity against any claims brought against the Republic of India or any India affiliate contrary to the release; and

iv. the interested party confirms it will treat any such award, judgment, or court order as null and void and without legal effect to the same extent as if it had been set aside by a competent court and will not take any action or initiate any proceeding or bring any claim based on that.

(l) The interested party confirms that the undertakings given herein are intended to be enforceable by the Republic of India, including so as to secure the irrevocable waiver, withdrawal or discontinuance (as appropriate) of all the proceeding and claims referred to in any of the clauses of this undertaking.

(m) The interested party represents and warrants that:

i. it has full legal power and authority to execute and deliver this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j) under applicable law;

ii. the execution, delivery and performance of this undertaking (including but not limited to the issuance of the indemnity described in clauses (i) and (j) has been duly authorised by all necessary corporate action, including but not limited to any board resolution or similar authorisation under applicable law (see Note 3);

iii. this undertaking constitutes the legal, valid and binding obligation of the interested party, enforceable against the interested party in accordance with its terms;

iv. such authorisations described in the above sub-clauses (i), (ii) and (iii) are effective under applicable law, and to this end, letters from local counsel in the relevant jurisdictions are attached to this undertaking which confirm the legality of such authorisations under applicable law; and

(n) This undertaking is governed by relevant Indian law and any dispute with respect to this undertaking shall be subject to Indian laws and be decided in accordance with the procedures specified in the Act under the exclusive jurisdiction of the relevant Income-tax authorities, tribunals or courts in India, as the case may be, which are empowered to decide disputes under the Act.

I also confirm that, I am aware of all the consequences and implications of this undertaking.

Place: ……………….. .

Date: ……………………….. .

Signature………………………………………….

Attachments

1. The Board Resolution and legal authorisation, as referred to in clause (m) of Part M.

2. An indemnity bond to the effect of clauses (i) and (j) of Part M in Part N of the undertaking in Form No. 1;

3. Copy of the public notice referred to in clause (k) of Part M, where Form No. 3 is not required to be furnished under sub-rule (6) of rule 11UF.

4. Attachments as required in different parts of the Annexure to Part M of this undertaking

Notes:

1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.

2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number/Aadhaar Number or Tax Deduction Account Number of the interested party are not available.

3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking shall, among other things:

a. record the Signatory’s power and authority to give the undertaking on behalf of the interested party; and

b. record the interested party’s power and authority to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking.

VERIFICATION

Verified that the contents of this undertaking are true to the best of my knowledge and belief. No part of the undertaking is false and nothing has been concealed or misstated therein.

Verified at ___________place_________ on this the ___day ____of ___month ______ ,_year ________ .

Place: ……………..

Date: ……………….

Signature…………….

Annexure

Part MA– Particulars of the relevant order or orders:

Sl. No.	Assessment Year or Financial year	Income-tax Authority passing the order	Details of the order under consideration		Nature of interest of the interested party
			Section and sub-section of the Income-tax Act, 1961	Date of order
(1)	(2)	(3)	(4)	(5)	(6)

Part MB– Particulars of the relevant order or orders covered by sub-clause (i) of clauses (b), (c) and (d) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	No appeal or application or petition or proceeding before any Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court has been filed(refer clause (b)(i) of the undertaking).	No proceeding has been initiated for arbitration, conciliation or mediation, and no notice has been given thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India, whether for protection of investment or otherwise (refer clause (c)(i) of the undertaking).	No proceeding initiated to enforce or pursue attachments in connection with any award, order or judgment, any other relief that may have been ordered or issued or passed by any tribunal or court or other judicial or administrative authority in relation to the said arbitration, conciliation or mediation proceeding in favour of the interested party against the Republic of India and Indian affiliates (refer clause (d)(i) of the undertaking).
(1)	(2)	(3)	(4)	(6)
		Applicable or Not applicable	Applicable or Not applicable	Applicable or Not applicable

Part MC – Particulars of the appeals or applications or petitions or proceeding under sub-clauses (ii) and (iii) of clause (b) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of appeals or applications or petitions or proceeding	Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed	Date of filing the appeals or applications or petitions or proceeding	Date of disposing of or withdrawal of such appeals or applications or petitions or proceeding (Please attach a copy of order by the Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court accepting the withdrawal or disposing of)
(1)	(2)	(3)	(4)	(5)	(6)

Part MD – Particulars of the appeals or applications or petitions or proceeding under sub-clause (iv) of clause (b) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of appeals or applications or petitions or proceeding	Income-tax authority or Authority for Advance Rulings constituted under section 245-O of the Act or the Board for Advance Rulings under section 245-OB or Income-tax Settlement Commission constituted under section 245B or the Interim Board for Settlement constituted under section 245AA or any tribunal or court before whom such appeals or applications or petitions or proceeding has been filed	Date of filing the appeals or applications or petitions or proceeding
(1)	(2)	(3)	(4)	(5)

Part ME – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clauses (ii) and (iii) of clause (c) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given	Particulars (including the name of the country where such proceeding for arbitration, conciliation or mediation are pending or notices thereof have been issued)	Date of initiating the proceeding for arbitration, conciliation or mediation/issue of notice	Name of the agreement entered into by India under which the proceeding for arbitration, conciliation or mediation are pending	Status of the proceeding for arbitration, conciliation or mediation	Date of disposing of or withdrawal of such proceeding for arbitration, conciliation or mediation, or notices (Please attach evidence of such disposing or withdrawal, including order of the Tribunal or court or other judicial or quasi-judicial or administrative authority)
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)

Part MF – Particulars of the proceeding for arbitration, conciliation or mediation, or notices under sub-clause (iv) of clause (c) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of proceeding for arbitration, conciliation or mediation, or notices thereof with case number or Notice given	Particulars (including the name of the country where such proceeding for arbitration, conciliation or mediation are pending or notices thereof have been issued)	Date of initiating the proceeding for arbitration, conciliation or mediation/issue of notice	Name of the agreement entered into by India under which the proceeding for arbitration, conciliation or mediation are pending	Status of the proceeding for arbitration, conciliation or mediation
(1)	(2)	(3)	(4)	(5)	(6)	(7)

Part MG – Particulars of the award, order or judgment or any other relief under sub-clause (v) of clause (c) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of such award, order or judgment or any other relief	Particulars (Including the name of the country) where proceeding related to such award, order, judgment or any other relief were held	Date of such award, order, judgment or any other relief along with reference number	Status of the award, order, judgment or any other relief
(1)	(2)	(3)	(4)	(5)	(6)

Part MH – Particulars of the proceeding to enforce any award, order or judgment or any other relief under sub-clauses (ii) and (iii) of clause (d) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of proceeding to enforce such award, order or judgment or any other relief	Particulars (including the name of the country where such proceeding to enforce any award, order or judgment or any other relief are taking place)	Date of filing proceeding to enforce any award, order or judgment or any other relief	Nature of such award, order or judgment or any other relief (Attach copy thereof)	Status of the proceeding to enforce such award, order or judgment or any other relief	Date of disposing of or withdrawal of proceeding to enforce such award, order or judgment or any other relief (Please attach a copy of evidence of such disposing of/withdrawal, including order of the Court or other judicial authority)
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)

Part MI – Particulars of the proceeding under sub-clause (iv) of clause (d) of the undertaking:

Sl. No.	Sl. No. in Part MA where the relevant order is mentioned	Nature of proceeding to enforce such award, order or judgment or any other relief	Particulars (including the name of the country where such proceeding to enforce any award, order or judgment or any other relief are taking place)	Date of filing proceeding to enforce any award, order or judgment or any other relief	Nature of such award, order or judgment or any other relief (Attach copy thereof)	Status of the proceeding to enforce such award, order or judgment or any other relief
(1)	(2)	(3)	(4)	(5)	(6)	(7)

 

Part N

INDEMNITY BOND

This Indemnity Bond (“Bond”) is made on this………….. day of……….. , 2021 by………….. (name in block letters) son/daughter of………………….. designation and nationality……………………… and related passport number…………….. (hereinafter referred to as “Signatory”) having Permanent Account Number/Aadhaar Number/Tax Deduction Account Number (See Note 1)………………. on behalf of……………. (name of the declarant or interested party, as the case may be) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number………………………… (See Note 2) and being duly authorised and competent to represent the declarant or interested party, as the case may be, in this regard pursuant to Board Resolution or legal authorisation (See Note 3), of the FIRST PART.

And

The Republic of India and any Indian affiliate (hereinafter collectively referred to as “releasees”) of the OTHER PART WHEREAS:

A. The Income-tax Rules, 1962 have been amended and the Income-tax (31st Amendment) Rules, 2021 have come into force from the date of their publication in the Official Gazette.

B. The declarant or interested party, as the case may be, has filed an undertaking under sub-rule (1) of rule 11UE of the Income -tax Rules, 1962, to which this indemnity bond is annexed. Any defined terms not defined herein shall have the same meaning as the definitions given under rule 11UE and the undertaking.

C. Pursuant to the above, the declarant or interested party, as the case may be, has agreed to indemnify, defend and hold harmless the Republic of India and Indian affiliates from and against any and all costs, expenses (including attorney fees and court fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of any claim at any time after the date of furnishing the undertaking in Form No. 1 by any person, related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief, or to any dispute underlying the award, and the declarant or interested party, as the case may be, has agreed to furnish an indemnity bond to this effect, such that the declarant or interested party, as the case may be, fully assumes the risk of any omission or mistake with respect to identification and procurement of authorisations and undertakings from any related parties or interested parties as provided in the undertaking, and securing the Republic of India and Indian affiliates from any claim related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief or to the dispute underlying the award against the Republic of India or Indian affiliates in connection with the relevant order or orders.

D. Accordingly the declarant or interested party, as the case may be, is executing this Indemnity Bond in favour of the Republic of India on the terms appearing hereunder.

NOW THIS INDEMINTY BOND WITNESSETH AS FOLLOWS:

1. In the event that any person or entity asserts, brings, files or maintains any claim against any releasee at any time on or after the date of furnishing this undertaking, related to any relevant order or orders, or in relation to any award, order, judgment, or any other relief, or to any dispute underlying the award, against the Republic of India or Indian affiliates in connection with the relevant order or orders, the declarant or interested party, as the case may be, shall indemnify, defend and hold harmless such releasees from and against any and all costs, expenses (including attorney fees and court fees), interest, damages, and liabilities of any nature arising out of or in any way relating to the assertion or, bringing, filing or maintaining of such claim.

2. The declarant or interested party, as the case may be, specifically represents that, to the best of
its knowledge, after—

i. the execution of this undertaking;

ii. the execution of any separate related undertaking by any other party in connection with the relevant order or orders; and

iii. withdrawal of all pending proceeding as outlined in this undertaking,

that no other claim regarding the said relevant order or orders referenced above, or any related award, judgment, or court order, or any aspect of the dispute underlying the award shall remain outstanding against the Republic of India or other releasee.

Explanation I.-For the removal of any doubt, the declarant’s or interested party’s indemnity of releasees under this clause shall include any claim brought by any third party alleging that it has obtained declarant’s or interested party’s, as the case may be, claims under an award, judgment or court order or the relevant order or orders.

Explanation II.- the declarant or interested party, as the case may be, fully assumes the risk through this indemnity of any omission or mistake with respect to securing releasees against any related claim by any person. If the declarant or interested party, as the case may be, fails to obtain any release from such person, the declarant or interested party, as the case may be, indemnifies through this document the releasees from any defense costs, court costs, and damages.

3. This Indemnity Bond shall be governed by the relevant laws of India and the Delhi High Court
shall have sole jurisdiction to entertain and try any dispute or difference arising out of or in connection with the terms of this Bond.

IN WITNESS WHEREOF the undersigned herein has signed and set his hands on this ………………. day of………… , 2021.

For and on behalf of the declarant or interested party, as the case may be,

Name and address of Witness

Signature of the Witness

1.

2.

Place:
Date:
Notes

1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.

2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number or Aadhaar Number or Tax Deduction Account Number of the declarant or interested party, as the case may be, are not available.

3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking shall, among other things:

(a) record the signatory’s power and authority to give the undertaking on behalf of the declarant or interested party, as the case may be; and

(b) record the declarant or interested party’s power and authority, as the case may be, to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking).]

Note:

1. Inserted by the Income-tax (Thirty-first Amendment) Rules, 2021, w.e.f. 1-10-2021.

Form No. : 2

¹[FORM NO. 2
[See rule 11UF]
Form for Certificate Under sub-rule (2) of rule 11UF

<Name of the declarant>
Address of the declarant
Sir/Madam

1. The……………………… (name of the declarant) (hereinafter referred to as the declarant) with Permanent Account Number/Aadhaar number/Tax Deduction Account Number/Company Identification Number and Taxpayer Identification Number……….. has filed an undertaking in Form No. 1 dated………. under sub-rule (1) of the rule 11UE of the rules.

2. Pursuant to the undertaking filed by the declarant in Form No. 1 under sub-rule (1) of rule 11UE, the provisions of fifth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9 of the Act shall be applicable to the orders mentioned below, subject to the fulfilment of the conditions specified in said proviso read with relevant rules and fulfilment of the undertakings by the declarant in Form No. 1:

TABLE

Sl. No.	Sl. No. of the Table in Part A of Form No. 1 where the relevant order is mentioned	Assessment Year or Financial year	Income-tax Authority passing the order	Details of the order under consideration		Taxes or Penalty determined	Interest	Total demand	Relief, provided in any appeal proceeding, if any	Demand recovered from the declarant	Pending demand or refund due as on date	Details of the attachments made by any Income-tax Authority
				Section and sub-section of the Income-tax Act, 1961	Date of order
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)	(13)

3. Demand recovered, as per the column (11) of the Table above, shall be refunded to the declarant, subject to the conditions under sub-rule (2) of the rule 11UE and the provisions of the Act, without any interest as per the provisions of the sixth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9 of the Act, attachments, if any, the details whereof are provided in column (13) of the Table, shall be revoked and appeals or applications or petitions or proceeding, if any, filed by any income-tax authority or any other person representing the Republic of India with respect to the specified orders, as per column (2) of the Table, shall be withdrawn or intimation shall be sent to the concerned person, on the issue of Form No. 4, as per the procedure provided in sub-rule (16) of rule 11UF. Further, no interest under section 244A of the Act will be payable to the declarant as per the provisions of sixth proviso to Explanation 5 to clause (i) of sub-section (1) of section 9 of the Act.

Certificate No…….
Place…..
Date………..

………………………….

(Principal Commissioner/Commissioner of Income-tax) ]

Note:

1. Inserted by the Income-tax (Thirty-first Amendment) Rules, 2021, w.e.f. 1-10-2021.

Form No. : 2A

FORM NO. 2A [Omitted by the IT (Tenth Amdt.) Rules, 2001, w.e.f. 2-7-2001. Earlier, existing Form No. 2A was inserted by the IT (Third Amdt.) Rules, 1994, w.e.f. 1-6-1994; substituted by the IT (Fourth Amdt.) Rules, 1995, w.e.f. 1-6-1995; amended by the IT (Fourth Amdt.) Rules, 1998, w.e.f. 1-4- 1998 and later on substituted by the IT (Fifth Amdt.) Rules, 2000, w.e.f. 11-5-2000.]

Form No. : 2B

FORM NO. 2B [Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 2B was inserted by the IT (Sixteenth Amdt.) Rules, 1995, w.e.f. 23-8-1995; amended by the IT (Eighth Amdt.) Rules, 1999, w.e.f. 18-5-1999, IT (Sixth Amdt.) Rules, 2000, w.e.f. 11-5-2000 and later on substituted by the IT (Fifteenth Amdt.) Rules, 2001, w.e.f. 27-7-2001.]

Form No. : 2C

FORM NO. 2C [Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 2C was inserted by the IT (Eighth Amdt.) Rules, 1997, w.e.f. 27-6-1997; substituted by the IT (Eleventh Amdt.) Rules, 1998, w.e.f. 25-8-1998; amended by the IT (Seventh Amdt.) Rules, 2000, w.e.f. 11-5-2000 and IT (Eighteenth Amdt.) Rules, 2002, w.e.f. 29-7-2002 and later on substituted IT (Sixteenth Amdt.) Rules, 2001, w.e.f. 27-7-2001.]

Form No. : 2E

FORM NO. 2E [Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 2E was inserted by the IT (Sixth Amdt.) Rules, 2003, w.e.f. 14-5-2003 and later on amended by the IT (Ninth Amdt.) Rules, 2004, w.e.f. 14-7-2004 and IT (Sixteenth Amdt.) Rules, 2005, w.e.f. 20-6-2005.]

Form No. : 3

¹[FORM NO. 3

[See rule 11UF]

Intimation for Withdrawal under sub-rule (3) of rule 11UF of the Income- tax Rules, 1962

To,

The Principal Commissioner/Commissioner

………………………………………. ……………………………….

Sir/Madam,

I……………… (name in block letters) son/daughter of ………………… designation ……………..and nationality ………………..and related passport number………………. (hereinafter referred to as “signatory”) having Permanent Account Number/Aadhaar Number ………………………(see Note 1) on behalf of …………………….. (name of the declarant) having Permanent Account Number/Aadhaar number/Tax Deduction Account Number (see Note 2) ……………………………….. and being duly authorised and competent to represent the declarant in this regard pursuant to Board Resolution and legal authorisation (see Note 3), as the case may be, hereby confirm that the declarant has received an order in Form No. 2 dated________

Pursuant thereto, I confirm that the pending appeals or applications or petitions, arbitration, conciliation, mediation, claims or other proceeding, if any, as referred in Part D, Part F, Part G, Part I and Part M of the undertaking in Form No. 1 dated…… have been irrevocably, on a with prejudice basis, withdrawn or discontinued and are not being pursued. The evidence of action taken in this regard are enclosed herewith.

Place…………….
Date……………..

………………..
Signature/Verification

Attachments

1. Attach the Board Resolution or legal authorisation, as the case may be, as referred to in clause (m) of the undertaking.

2. Attach the evidence of action taken as referred above.

VERIFICATION

Verified that the contents of this intimation are true to the best of my knowledge and belief. No part of the intimation is false and nothing has been concealed or misstated therein.

Verified at……place………. on this the ……. day …………. of…. month……….,…year………..
Place: ……………..
Date: ……………..

Signature
………………………………..

Notes

1. This information is required to be furnished where the Permanent Account Number or Aadhaar Number of the signatory is available.

2. Company Identification Number and Taxpayer Identification Number are to be provided where Permanent Account Number or Aadhaar Number or Tax Deduction Account Number of the interested party are not available.

3. The Board Resolution or legal authorisation, as referred to in clause (m) of the undertaking and such Board resolution or legal authorisation shall, among other things:

(a) record the signatory’s power and authority to give the undertaking on behalf of the interested party; and

(b) record the interested party’s power and authority to indemnify defend and hold harmless the Republic of India and the Indian affiliates in accordance with clause (i) of the undertaking.]

1. Inserted by the Income-tax (Thirty-first Amendment) Rules, 2021, w.e.f. 1-10-2021.

Form No. : 3AA

FORM NO. 3AA [Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 3AA was inserted by the IT (Fourteenth Amdt.) Rules, 2002, w.e.f. 1-4-2003 and later on amended by the IT (Fifteenth Amdt.) Rules, 2004, w.e.f. 1-4-2005.]

Form No. : 3AAA

FORM NO. 3AAA [Omitted by the IT (Twenty-first Amdt.) Rules, 2021, w.e.f. 29-7-2021 (see rule 130). Earlier, Form No. 3AAA was inserted by the IT (Sixth Amdt.) Rules, 1986, w.e.f. 1-4-1987 and later on amended by the IT (Ninth Amdt.) Rules, 1987 and IT (Fourteenth Amdt.) Rules, 2002, w.e.f. 1-4-2003.]

Form No. : 3AB

FORM NO. 3AB [Omitted by the IT (Thirty-second Amdt.) Rules, 1999, w.e.f. 19-11-1999. Earlier, Form No. 3AB was inserted by the IT (Amdt.) Rules, 1978 and amended by the IT (Sixth Amdt.) Rules, 1986, w.e.f. 1-4-1987.]

Tax Reference Tables

Provisions applicable to business entities

Income-tax Act contains provisions for the computation of income from five different sources and income from business and profession is one of them. Part D of Chapter IV of the Income-tax Act, 1961 contains provisions for the computation of profits and gains of business or profession. It is also popularly called as PGBP.

When an assessee carries on any business or profession, the income arising from such business or profession shall be calculated and taxed under the head ‘Profit and gains from Business or Profession’. The business income shall be computed in accordance with the method of accounting regularly followed by the assessee. For the computation of business income, a taxpayer can follow either mercantile system of accounting orcash basis of accounting.

Chargeability:

The following incomes are chargeable to tax under the head Profit and Gains from Business or Profession:

S. No.	Section	Particulars
1.	28(i)	Profit and gains from any business or profession carried on by the assessee at any time during the previous year
2.	28(ii)	Any compensation or other payment due to or received by any specified person
3.	28(iii)	Income derived by a trade, professional or similar association from specific services performed for its members
4.	28(iiia)	Profit on sale of a license granted under the Imports (Control) Order 1955, made under the Import Export Control Act, 1947
5.	28(iiib)	Cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India
6.	28(iiic)	Any duty of Customs or Excise repaid or repayable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971.
7.	28(iiid)	Profit on transfer of Duty Entitlement Pass Book Scheme, under Section 5 of Foreign Trade (Development and Regulation) Act, 1992
8.	28(iiie)	Profit on transfer of Duty-Free Replenishment Certificate, under Section 5 of Foreign Trade (Development and Regulation) Act 1992
9.	28(iv)	Value of any benefits or perquisites arising from a business or the exercise of a profession.
10.	28(v)	Interest, salary, bonus, commission, or remuneration due to or received by a partner from partnership firm
11.	28(va)	a) Any sum received or receivable for not carrying out any activity in relation to any business or profession; or b) Any sum received or receivable for not sharing any know-how, patent, copyright, trademark, licence, franchise, or any other business or commercial right or information or technique likely to assist in the manufacture of goods or provision of services.
12.	28(vi)	Any sum received under a Key man Insurance policy including the sum of bonus on such policy
12A.	28(via)	Any profit or gains arising from conversion of inventory into capital asset.
13.	28(vii)	Any sum received ( or receivable) in cash or in kind, on account of any capital assets (other than land or goodwill or financial instrument) being demolished, destroyed, discarded or transferred, if the whole of the expenditure on such capital assets has been allowed as a deduction under section 35AD
14.	Explanation 2 to Section 28	Income from speculative transactions. However, it shall be deemed to be distinct and separate from any other business.
14A.	Explanation 3 to Section 28	Income from letting out of a residential house shall be chargeable to tax under the head ‘Income from house property’
15.	41(1)	Remission or cessation of liability in respect of any loss, expenditure, or trading liability incurred by the taxpayers Recovery of trading liability by the successor which was allowed to the predecessor shall be chargeable to tax in the hands of the successor. Succession could be due to amalgamation or demerger or succession of a firm succeeded by another firm or company, etc. Any liability which is unilaterally written off by the taxpayer from the books of accounts shall be deemed as remission or cessation of such liability and shall be chargeable to tax.
16.	41(2)	Depreciable asset in case of power generating units, is sold, discarded, demolished or destroyed, the amount by which sale consideration and/ or insurance compensation together with scrap value exceeds its WDV shall be chargeable to tax.
17.	41(3)	Where any capital asset used in scientific research is sold without having been used for other purposes and the sale proceeds together with the amount of deduction allowed under section 35 exceed the amount of the capital expenditure, such surplus or the amount of deduction allowed, whichever is less, is chargeable to tax as business income in the year in which the sale took place.
18.	41(4)	Where bad debts have been allowed as deduction under Section 36(1)(vii) in earlier years, any recovery of same shall be chargeable to tax.
19.	41(4A)	Amount withdrawn from special reserves created and maintained under Section 36(1)(viii) shall be chargeable as income in the previous year in which the amount is withdrawn.
20.	41(5)	Loss of a discontinued business or profession could be adjusted from the deemed business income as referred to in section 41(1), 41(3), (4) or (4A) without any time limit.
20A.	43AA	Any foreign exchange gain or loss arising in respect of specified foreign currency transactions shall be treated as income or loss. Such gain or loss shall be computed in accordance with notified ICDS [subject to Section 43A]
21.	43CA	Where consideration for transfer of land or building or both as stock-in-trade is less than the stamp duty value, the value so adopted shall be deemed to be the full value of consideration for the purpose of computing income under this head. However, no such adjustment is required to be made if value adopted for stamp duty purposes does not exceed 110% of the sale consideration. Note: To boost the demand in the real-estate sector and to enable the real-estate developers to sell their unsold inventory at a lower rate, the safe harbour limit is increased from existing 10% to 20% in case of transfer of residential property during the period from 12-11-2020 to 30-06-2021 by way of the first-time allotment to any person. Further, the consideration received or accruing as a result of such transfer should not exceed Rs. 2 crores.
22.	43CB	The profits and gains arising from construction contract or a contract for providing service is to be determined on the basis of percentage completion method, in accordance with the notified ICDS. In case of contract for providing services with duration of not more than 90 days, the profits and gains shall be determined on basis of project completion method. While as in case of contract for providing services with indeterminate number of acts over a specified period of time shall be determined on basis of straight line method.
23.	43D	In the case of following assessees, income by way of interest on the prescribed bad or doubtful debts is chargeable to tax in the year of receipt or in the year of credit of such income in the profit and loss account, whichever is earlier: (a) A public financial institution; (b) A scheduled bank; (c) A co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank; (d) A state financial corporation; (e) A state Industrial investment corporation; (f) Such class of non-banking financial companies as notified by Govt.
24	—	Assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Central Govt. or State Govt. or any authority or body or agency to the assessee would be included in definition of income as referred to in Section 2(24). However, in the following cases subsidy or grant shall not be treated as income: i) The subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset in accordance with the provisions of Explanation 10 to clause (1) of Section 43; ii) The subsidy or grant by the Central Government for the purpose of the corpus of a trust or institution established by the Central Government or a State Government, as the case may be.

Deductions under Sections 30 to 37

Amount deductible, while computing, Profits and Gains of Business or Profession are:-

Section	Nature of expenditure	Quantum of deduction	Assessee
30	Rent, rates, taxes, repairs (excluding capital expenditure) and insurance for premises	Actual expenditure incurred excluding capital expenditure	All assessee
31	Repairs (excluding capital expenditure) and insurance of machinery, plant and furniture	Actual expenditure incurred excluding capital expenditure	All assessee
32(1)(i)	Depreciation on i) buildings, machinery, plant or furniture, being tangible assets; ii) know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature not being goodwill of business or profession, being intangible assets	Allowed at prescribed percentage on Straight Line Method for each asset Provided that where an asset is acquired by the assessee during the previous year and is put to use for a period of less than one hundred and eighty days in that previous year, the deduction in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset.	Assessees engaged in business of generation or generation and distribution of power Note: Taxpayers engaged in the business of generation or generation and distribution of power shall have the option to claim depreciation either on basis of straight line basis method or written down value method on each block of asset.
32(1)(ii)	Depreciation on i) buildings, machinery, plant or furniture, being tangible assets; ii) know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature not being goodwill of business or profession, being intangible assets	Allowed at prescribed percentage on WDV method for each block of asset Provided that where an asset is acquired by the assessee during the previous year and is put to use for a period of less than one hundred and eighty days in that previous year, the deduction in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset.	All assessees
32(1)(iia)	Additional depreciation on new plant and machinery (other than ships, aircraft, office appliances, second hand plant or machinery, etc.). (subject to certain conditions)	Additional depreciation shall be available @20 % of the actual cost of new plant and machinery. Provided that where an asset is acquired by the assessee during the previous year and is put to use for a period of less than one hundred and eighty days in that previous year, then deduction of additional depreciation would be restricted to 50% in the year of acquisition and balance 50% would be allowed in the next year	All assessee engaged in – manufacture or production of any article or thing; or – generation, transmission or distribution of power (if taxpayer is not claiming depreciation on basis of straight line method)
Proviso to Section 32(1)(iia)	Additional depreciation on new plant and machinery (other than ships, aircraft,office appliances, second hand plant or machinery, etc.)) (Subject to certain conditions)	Additional depreciation shall be available @35 % of the actual cost of new plant and machinery. Provided that where an asset is acquired by the assessee during the previous year and is put to use for a period of less than one hundred and eighty days in that previous year, then deduction of additional depreciation would be restricted to 50% of actual cost in the year of acquisition and balance 50% would be allowed in the next year Note: 1. Manufacturing unit should be set-up on or after 1st day of April, 2015. 2. New plant and machinery acquired and installed during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020	All assessees- where an assessee sets up an undertaking or enterprise for production or manufacture of any article or thing in any notified backward area in state of the state of Andhra Pradesh, Bihar, Telangana or West Bengal.
32AC	Deduction under section 32AC is available if actual cost of new plant and machinery acquired and installed by a manufacturing company during the previous year exceeds Rs. 25/100 Crores, as the case may be.(Subject to certain conditions)	15% of actual cost of new asset	Company engaged in business or manufacturing or production of any article or thing
32AD	Investment allowance for investment in new plant and machinery if manufacturing unit is set-up in the notified backward area in the state of Andhra Pradesh, Bihar, Telangana or West Bengal(Subject to certain conditions)	Investment allowance shall be available @15 % of the actual cost of new plant and machinery in the year of installation of new asset. Note:- 1) New asset should be acquired and installed during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020. 2) Manufacturing unit should be set-up on or after 1st day of April, 2015. 3) Deduction shall be allowed under Section 32AD in addition to deduction available under Section 32AC if assessee fulfils the specified conditions	All assessee who acquired new plant and machinery for the purpose of setting-up manufacturing unit in the notified backward area in the state of Andhra Pradesh, Bihar, Telangana or West Bengal
33AB	Amount deposited in Tea/Coffee/Rubber Development Account by assessee engaged in business of growing and manufacturing tea/Coffee/Rubber in India	Deduction shall be lower of following: a) Amount deposited in account with National Bank for Agricultural and Rural Development (NABARD) or in Deposit Account of Tea Board, Coffee Board or Rubber Board in accordance with approved scheme; or b) 40% of profits from such business before making any deduction under section 33AB and before adjusting any brought forward loss. (Subject to certain conditions)	All assessee engaged in business of growing and manufacturing tea/Coffee/Rubber
33ABA	Amount deposited in Special Account with SBI/Site Restoration Account by assessee carrying on business of prospecting for, or extraction or production of, petroleum or natural gas or both in India	Deduction shall be lower of following: a) Amount deposited in Special Account with SBI/Site Restoration Account; or b) 20% of profits from such business before making any deduction under section 33ABA and before adjusting any brought forward loss. (Subject to certain conditions)	All assessee engaged in business of prospecting for, or extraction or production of, petroleum or natural gas or both in India
35(1)(i)	Revenue expenditure on scientific research pertaining to business of assessee is allowed as deduction (Subject to certain conditions).	Entire amount incurred on scientific research is allowed as deduction. Expenditure on scientific research within 3 years before commencement of business (in the nature of purchase of materials and salary of employees other than perquisite) is allowed as deduction in the year of commencement of business to the extent certified by prescribed authority.	All assessee
35(1)(ii)	Contribution to approved research association, university, college or other institution to be used for scientific research shall be allowed as deduction (Subject to certain conditions)	100% of sum paid to such association, university, college, or other institution is allowed as deduction.	All assessee
35(1)(iia)	Contribution to an approved company registered in India to be used for the purpose of scientific research is allowed as deduction (Subject to certain conditions)	100% of sum paid to the company is allowed as deduction	All assessee
35(1)(iii)	Contribution to approved research association, university, college or other institution with objects of undertaking statistical research or research in social sciences shall be allowed as deduction (Subject to certain conditions)	100% of sum paid to such association, university, college, or other institution is allowed as deduction	All assessee
35(1)(iv) read with 35(2)	Capital expenditure incurred during the year on scientific research relating to the business carried on by the assessee is allowed as deduction (Subject to certain conditions)	Entire capital expenditure incurred on scientific research is allowed as deduction. Capital expenditure incurred within 3 years before commencement of business is allowed as deduction in the year of commencement of business. Note: i. Capital expenditure excludes land and any interest in land; ii. No depreciation shall be allowed on such assets.	All assessee
35(2AA)	Payment to a National Laboratory or University or an Indian Institute of Technology or a specified person is allowed as deduction. The payment should be made with the specified direction that the sum shall be used in a scientific research undertaken under an approved programme.	100% of payment is allowed as deduction (Subject to certain conditions).	All assessee
35(2AB)	Any expenditure incurred by a company on scientific research (including capital expenditure other than on land and building) on in-house scientific research and development facilities as approved by the prescribed authorities shall be allowed as deduction (Subject to certain conditions). Expenditure on scientific research in relation to Drug and Pharmaceuticals shall include expenses incurred on clinical trials, obtaining approvals from authorities and for filing an application for patent.	100% of expenditure so incurred shall be allowed as deduction. Note: i. Company should enter into an agreement with the prescribed authority for co-operation in such research and development and fulfils conditions with regard to maintenance of accounts and audit thereof and furnishing of reports in such manner as may be prescribed.	Company engaged in business of bio-technology or in any business of manufacturing or production of eligible articles or things
35ABA	Capital expenditure incurred and actually paid for acquiring any right to use spectrum for telecommunication services shall be allowed as deduction over the useful life of the spectrum.	Deduction will be available in equal installments starting from the year in which actual payment is made and ending in the year in which spectrum comes to an end. Note: If spectrum fee is actually paid before the commencement of business, the deduction will be available from the year in which business is commenced.	All assessee engaged in telecommunication services
35ABB	Capital expenditure incurred for acquiring any license or right to operate telecommunication services shall be allowed as deduction over the term of the license.	Deduction would be allowed in equal installments starting from the year in which such payment has been made and ending in the year in which license comes to an end.	All assessee engaged in telecommunication services
35AC	Expenditure by way of payment of any sum to a public sector company/local authority/approved association or institution for carrying out any eligible scheme or project (Subject to certain conditions).	Actual payment made to prescribed entities. However, a company can also claim deduction for expenditure incurred by it directly on eligible projects. Note:- No deduction in any A.Y. commencing on or after the 1st day of April, 2018	All assessee. However, deduction for direct expenditure is allowed only to a company
35AD	Deduction in respect of `expenditure on specified businesses, as under: a) Setting up and operating a cold chain facility b) Setting up and operating a warehousing facility for storage of agricultural produce c) Building and operating, anywhere in India, a hospital with at least 100 beds for patients d) Developing and building a housing project under a notified scheme for affordable housing e) Production of fertilizer in India (Subject to certain conditions)	150% of capital expenditure incurred for the purpose of business is allowed as deduction provided the specified business has commenced its operation on or after 01-04-2012. 100% of capital expenditure will be allowed to be deducted from the assessment year 2018-19 onwards Note: If such specified businesses commence operations on or before 31-03-2012 but after prescribed dates, deduction shall be limited to 100% of capital expenditure. Note: No deduction of any capital expenditure above Rs 10,000 shall be allowed if it is incurred in cash.	All assessee
35AD	Deduction in respect of expenditure on specified businesses, as under: a) Laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network; b) Building and operating, anywhere in India, a hotel of two-star or above category; c) Developing and building a housing project under a scheme for slum redevelopment or rehabilitation d) Setting up and operating an inland container depot or a container freight station e) Bee-keeping and production of honey and beeswax f) Setting up and operating a warehousing facility for storage of sugar g) Laying and operating a slurry pipeline for the transportation of iron ore h) Setting up and operating a semi-conductor wafer fabrication manufacturing unit i) Developing or maintaining and operating, or developing, maintaining and operating a new infrastructure facility (Subject to certain conditions)	100% of capital expenditure incurred for the purpose of business is allowed as deduction provided specified businesses commence operations on or after the prescribed dates. Note: No deduction of any capital expenditure above Rs 10,000 shall be allowed if the payment for such expenditure is made otherwise than by an account payee cheque/draft or ECS or through prescribed electronic mode of payment.	All assessee Note: Such deduction is available to Indian company in case of following business, namely;- i) Business of laying and operating a cross-country natural gas or crude or petroleum oil pipeline network ii) Developing or maintaining and operating or developing, maintaining and operating a new infrastructure facility.
35CCA	Payment to following Funds are allowed as deduction: a) National Fund for Rural Development; and b) Notified National Urban Poverty Eradication Fund	Actual payment to specified funds	All assessee
35CCC	Expenditure (not being cost of land/building) incurred on notified agricultural extension project for the purpose of training, educating and guiding the farmers shall be allowed as deduction, provided the expenditure to be incurred is expected to be more than Rs. 25 lakhs (Subject to certain conditions).	100% of the expenditure (Subject to certain conditions)	All assessee
35CCD	Expenditure incurred by a company (not being expenditure in the nature of cost of any land or building) on any notified skill development project is allowed as deduction (Subject to certain conditions).	100% of the expenditure (Subject to certain conditions) Note: (i) No deduction shall be allowed to a company engaged in manufacturing alcoholic spirits or tobacco products.	Company engaged in manufacturing of any article or providing specified services
35D	An Indian company can amortize certain preliminary expenses (up to maximum of 5% of cost of the project or capital employed, whichever is more) (Subject to certain conditions and nature of expenditures)	Qualifying preliminary expenditure is allowable in each of 5 successive years beginning with the previous year in which the extension of undertaking is completed or the new unit commences production or operation.	Indian Company
35D	Non-corporate taxpayers can amortize certain preliminary expenses (up to maximum of 5% of cost of the project) (Subject to certain conditions and nature of expenditures)	Qualifying preliminary expenditure is allowable in each of 5 successive years beginning with the previous year in which the extension of undertaking is completed or the new unit commences production or operation.	Resident Non-corporate assessees
35DD	Expenditure incurred after 31-3-1999 in respect of amalgamation or demerger can be amortized by an Indian Company	Expenditure is allowed as deduction in five equal installments in 5 previous years starting with the year in which amalgamation or demerger took place.	Indian Company
35DDA	Expenditure incurred under Voluntary Retirement Scheme is allowed as deduction.	Each payment under VRS is allowed as deduction in five equal installments in 5 previous years.	All assessee
35E	Qualifying expenditure incurred by resident persons on prospecting for the minerals or on the development of mine or other natural deposit of such minerals shall be allowed as deduction (Subject to certain conditions).	Eligible expenditure is allowed as deduction in ten equal installments in 10 previous years.	Resident persons
36(1)(i)	Insurance premium covering risk of damage or destruction of stocks/stores	Actual expenditure incurred	All assessee
36(1)(ia)	Insurance premium covering life of cattle owned by a member of co-operative society engaged in supplying milk to federal milk co-operative society	Actual expenditure incurred	All assessee
36(1)(ib)	Medical insurance premium paid by any mode other than cash, to insure employee’s health under (a) scheme framed by GIC of India and approved by Central Government; or (b) scheme framed by any other insurer and approved by IRDA	Actual expenditure incurred	All assessee
36(1)(ii)	Bonus or commission paid to employees which would not have been payable as profit or dividend if it had not been paid as bonus or commission	Actual expenditure incurred	All assessee
36(1)(iii)	Interest on borrowed capital (Subject to certain conditions)	Interest paid in respect of capital borrowed for the purposes of the business or profession shall be allowed as deduction. However, if capital is borrowed for acquiring an asset, then interest for any period beginning from the date on which capital was borrowed till the date on which asset was first put to use, shall not be allowed as deduction.	All assessee
36(1)(iiia)	Discount on Zero Coupon Bonds (Subject to certain conditions)	Pro-rata amount of discount on zero coupon bonds shall be allowed as deduction over the life of such bond	Specified Assessee
36(1)(iv)	Employer’s contributions to recognized provident fund and approved superannuation fund [subject to certain limits and conditions]	Actual expenditure incurred	All assessee
36(1)(iva)	Any sum paid by assessee-employer by way of contribution towards a pension scheme, as referred to in section 80CCD, on account of an employee.	Actual expenditure not exceeding 14% of the salary* of the employee *Salary = Basic Pay + Dearness Allowance (to the extent it forms part of retirement benefits)+ turnover based commission	All assessee- Employer
36(1)(v)	Employer’s contribution towards approved gratuity fund created exclusively for the benefit of employees under an irrevocable trust shall be allowed as deduction (Subject to certain conditions).	Actual expenditure not exceeding 8.33% of salary of each employee	All assessee- Employer
36(1)(va)	Deposit of employee’s contributions in their respective provident fund or superannuation fund or any fund set up under Employees’ State Insurance Act, 1948	Actual amount received if credited to the employee’s account in relevant fund on or before due date specified under relevant Act	All assessee – Employer
36(1)(vi)	Allowance in respect of animals which have died or become permanently useless (Subject to certain conditions)	Actual cost of acquisition of such animals less realization on sale of carcasses of animals	All assessee
36(1)(vii)	Bad debts which have been written off as irrecoverable (Subject to certain conditions)	Actual bad debts which have been written off from books of accounts Note:- However, if amount of debt or part thereof has been taken into account in computing the income of assessee on basis of income computation and disclosure standards notified under Section 145(2) without recording the same in accounts then, such debt shall be allowed in the previous year in which such debt or part thereof becomes irrecoverable. It shall be deemed that such debt or part thereof has been written off as irrecoverable in the accounts.	All assessee
36(1)(viia)	Deductions for provision for bad and doubtful debts created by certain banks, financial institutions and non-banking financial company (Subject to certain conditions). Note Deduction in respect of bad debts actually written off under section 36(1)(vii) shall be limited to that amount of bad debts which exceed the provision for bad and doubtful debts created under section 36(1)(viia).	Deductions for provision for bad and doubtful debts shall be limited to following: (a) In case of scheduled and non-scheduled banks: Sum not exceeding aggregate of 8.5% of total income (before any deductions under this provision and Chapter VI-A) and 10% of aggregate average advances made by rural branches of such bank; (b) In case of Financial Institutions: Up to 5% of total income before any deductions under this provision and Chapter VI-A; and (c) In case of foreign banks: Up to 5% of total income before any deductions under this provision and Chapter VI-A (d) In case of non-banking financial company: Up to 5% of total income before any deduction under this provision and chapter VI-A	Banks, Public Financial Institutions, Non-banking financial company, State Financial Corporation, State Industrial Investment Corporations
36(1)(viii)	Deduction under this provisions is allowed to following entities in respect of amount transferred to special reserve account: a) Financial Corporation which is engaged in providing long-term finance for industrial or agricultural development or development of infrastructure facility in India; or b) Public company registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of residential houses in India. [Subject to certain conditions]	Deduction shall be allowed to the extent of lower of following: a) Amounts transferred to special reserve account b) 20% of profits derived from eligible business c) 200% of paid-up capital and general reserve (on last day of previous year) minus balance in special reserve account (on first day of previous year)	Specified financial corporations or public company
36(1)(ix)	Expenditure incurred by a company on promotion of family planning amongst employees is allowed as deduction	1) Entire revenue expenditure is allowed as deduction 2) Capital expenditure shall be allowed as deduction in five equal installment in five years	Company
36(1)(xii)	Any expenditure incurred by a notified corporation or body corporate constituted or established by a Central, State or Provincial Act, for the objects and purposes authorized by the respective Act is allowed as deduction	Actual expenditure incurred (not being in the nature of capital expenditure)	Notified corporations
36(1)(xiv)	Contribution to Credit Guarantee Trust Fund for micro and small industries is allowed as deduction	Actual expenditure incurred	Public Financial Institutions
36(1)(xv)	Securities Transaction Tax paid	Actual expenditure incurred if corresponding income is included as income under the head profits and gains of business or profession	All assessee
36(1)(xvi)	Amount equal to commodities transaction tax paid by an assessee in respect of taxable commodities transactions entered into in the course of his business during the previous year is allowed as deduction	Actual expenditure incurred if corresponding income is included as income under the head profits and gains of business or profession	All assessee
36(1)(xvii)	Amount of expenditure incurred by a co-operative society engaged in the business of manufacture of sugar for purchase of sugarcane.	Deduction would be allowed the extent of lower of following: a) Actual purchase price of sugarcane, or b) Price of sugarcane fixed or approved by the Government	Co-operative society engaged in the business of manufacture of sugar
36(1)(xviii)	Marked to market loss or other unexpected loss as computed in accordance with notified ICDS	Actual losses incurred	All assessee
37(1)	Any other expenditure [not being personal or capital expenditure and expenditure mentioned in sections 30 to 36] laid out wholly and exclusively for purposes of business or profession Note: (1) Expenditure incurred to provide perquisite, in whatever form to any person, irrespective of whether the recipient is engaged in any business or profession, where the acceptance of such benefit or perquisite is a violation of any rule, law or regulation, which governs the recipient, shall be deemed to have not been incurred for business or profession and accordingly, the deduction for the same shall not be available. (2) The expenditure, whether constituting an offence as per the prevailing laws in India or outside India, or prohibited by any law in force – whether in India or outside India, or to settle proceedings initiated in relation to contravention under such law as may be notified by the Central Govt,. shall not be eligible for deduction under section 37(1).	Actual expenditure incurred	All assessee
37(2B)	Expenditure on advertisement in any souvenir, brochure etc. published by a political party shall not be allowed as deduction	Not Allowed	All assessee

Amount expressly disallowed under the Act

Section	Description
40(a)(i)	Any sum (other than salary) payable outside India or to a non-resident, which is chargeable to tax in India in the hands of the recipient, shall not be allowed to be deducted if it was paid without deduction of tax at source or if tax was deducted but not deposited with the Central Government till the due date of filing of return. Where deductor has failed to deduct the tax and he is not deemed to be an assessee in default under first proviso to section 201(1), then it shall be deemed that the deductor has deducted and paid the tax on the date on which the payee has furnished his return of Income. However, if tax is deducted or deposited in subsequent year, as the case may be, the expenditure shall be allowed as deduction in that year.
40(a)(ia)	Any sum payable to a resident, which is subject to deduction of tax at source, would attract 30% disallowance if it was paid without deduction of tax at source or if tax was deducted but not deposited with the Central Government till the due date of filing of return. However, where in respect of any such sum, tax is deducted or deposited in subsequent year, as the case may be, the expenditure so disallowed shall be allowed as deduction in that year. Where deductor has failed to deduct the tax and he is not deemed to be an assessee in default under first proviso to section 201(1), then it shall be deemed that the deductor has deducted and paid the tax on the date on which the payee has furnished his return of Income.
40(a)(ib)	Any sum paid or payable to a non-resident which is subject to a deduction of Equalisation levy would attract disallowance if such sum was paid without deduction of such levy or if it was deducted but not deposited with the Central Government till the due date of filing of return. However, where in respect of any such sum, Equalisation levy is deducted or deposited in subsequent year, as the case may be, the expenditure so disallowed shall be allowed as deduction in that year. Note: This provision has been inserted by the Finance Act, 2016, w.e.f. 1-6-2016
40(a)(ii)	Any sum paid on account of any rate or tax levied on the profits and gains of business or profession is not deductible Note: Tax shall include ‘surcharge or cess’.
40(a)(iia)	Wealth-tax or any other tax of similar nature shall not be deductible
40(a)(iib)	Amount paid by way of royalty, license fee, service fee, privilege fee, service charge or any other fee or charge, by whatever name called, which is levied exclusively on (or any amount appropriated) a State Government undertaking by the State Government shall not be deductible.
40(a)(iii)	Salaries payable outside India, or in India to a non-resident, on which tax has not been paid/deducted at source is not deductible.
40(a)(iv)	Payments to provident fund or other funds for employees’ benefit shall not be deductible if no effective arrangements have been made to ensure deduction of at source from payments made from such funds to employees which shall be chargeable to tax as ‘salaries’.
40(a)(v)	Tax paid by the employer on non-monetary perquisites provided to employees is not deductible if the tax so paid is not taxable in the hands of employees by virtue of Section 10(10CC).
40(b)	Following sum paid by a partnership firm to its partners shall not be allowed to be deducted: 1) Salary, bonus, commission or remuneration paid to non-working partners; 2) Remuneration or interest paid to the partners is not in accordance with the terms of the partnership deed; 3) Remuneration or interest to partners is in accordance with the terms of the partnership deed but relates to any period prior to the date of the deed; 4) Interest to partners is in accordance with the terms of the partnership deed but exceeds 12% per annum; 5) Remuneration to partners is in accordance with the terms of the partnership deed but exceeds the following permissible limit: a) On first Rs. 6 Lakhs of book profit or in case of loss – Rs. 3,00,000 or 90% of book profit, whichever is more; b) On the balance of the book profit – 60% of book profit
40(ba)	Interest, salary, bonus, commission or remuneration paid by Association of Persons or Body of Individuals to its members shall not be allowed as deduction (Subject to certain conditions).
40A(2)	Any payment to related parties (relatives, directors, partner, member of HUF/AOP, person who has substantial interest in business of the taxpayer, etc.) in respect of any expenditure shall be disallowed to the extent such expenditure is considered excessive or unreasonable by the Assessing Officer having regard to its fair market value.
40A(3)/(3A)	An expenditure, which is otherwise deductible under any provision of the Act, shall be disallowed if payment thereof has been made otherwise than by account payee cheque/bank draft or use of electronic clearing system through a bank account or through other prescribed electronic mode of payment and it exceeds Rs. 10,000 (Rs. 35,000 in case of payment made for plying, hiring or leasing goods carriages) in a day (Subject to certain conditions and exceptions).
40A(7)	Provision for payment of gratuity to employees, other than a provision for contribution to approved gratuity fund, shall not be allowed as deduction (Subject to specified conditions). Gratuity actually paid (or payable) during the year and contribution to approved gratuity fund is allowed as deduction.
40A(9)	Any sum paid as an employer for setting up or as contribution to any fund, trust, company, AOP, BOI, Society or other institution (other than recognized provident fund, approved superannuation fund, approved gratuity fund or pension scheme referred to in section 80CCD) shall not be allowed as deduction if such contribution or payment is not required by any law.
40A(13)	No deduction shall be allowed in respect of marked to market loss or other unexpected loss except as allowable under section 36(1)(xviii).

Expenses deductible on actual payment basis

The following expenses shall be allowed as deduction if such expenditure are actually paid on or before the due date of filing of return of income:-

Section	Particulars
43B(a)	Any Tax, Duty, Cess or Fees under any Law
43B(b)	Any contribution to Provident Fund/Superannuation Fund/Gratuity Fund/Welfare Fund
43B(c)	Bonus or Commission paid to employees which would not have been payable as profit or dividend
43B(d)	Interest on Loan or Borrowings from Public Financial Institutions/State Financial Institutions etc.
43B(da)	Interest on loan from such class of NBFC as may be notified by the Central Government
43B(e)	Interest on loan or advance from bank
43B(f)	Payment of Leave Encashment
43B(g)	Sum payable to the Indian Railways for the use of railway assets
43B(h)	Sum payable to a micro or small enterprise beyond the time limit specified in Section 15 of the MSMED Act, 2006. (Note 2)

Note: 1. No deduction shall be allowed under section 43B if any interest has been converted into a debenture or any other instrument by which liability to pay interest is deferred to a future date.

2. Payment made to micro or small enterprise beyond the time limit shall be allowed as deduction only on actual payment.

Other provisions

Section	Particulars	Provision
42	Special allowance in case of business of prospecting etc. for mineral oil (including petroleum and natural gas) in relation to which the Central Government has entered into an agreement with the taxpayer for the association or participation (Subject to certain conditions).	Following deductions shall be allowed as deductions: a) Any infructuous exploration expenditure b) Expenditure on drilling or exploration activities or services, etc. c) Allowance in relation to depletion of mineral oil, etc.
43A	Special provisions consequential to changes in rate of exchange of Currency (Subject to certain conditions).	Any increase or decrease in the liability incurred in foreign currency (to acquire a capital asset) pursuant to fluctuation in the foreign exchange rates shall be adjusted with the actual cost of such asset only on actual payment of the liability.
43C	Acquisition of any asset (except stock-in-trade) by the taxpayer in the scheme of amalgamation or by way of gift, will etc.	Cost of acquisition of any asset (except stock-in-trade) acquired by the taxpayer in the scheme of amalgamation or by way of gift, will etc. from the transferor (who sold it as stock-in-trade) shall be the cost of acquisition in the hands of transferor as increased by cost of any improvement made

Provisions applicable to Non-Resident/Foreign Company

Section	Particulars	Limit of exemption or Computation of income/deduction	Available to
44B read with 172	Income from shipping business shall be computed on presumptive basis (Subject to certain conditions).	7.5% of specified sum shall be deemed to be the presumptive income	Non-resident engaged in shipping business
44BB	Income of a non-resident engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils shall be computed on presumptive basis (Subject to certain conditions).	10% of specified sum shall be deemed to be the presumptive income	Non-resident engaged in activities connected with exploration of mineral oils
44BBA	Income of a non-resident engaged in the business of operation of aircraft shall be computed on presumptive basis (Subject to certain conditions).	5% of specified sum shall be deemed to be the presumptive income	Non-resident engaged in the business of operating of aircraft
44BBB	Income of a foreign company engaged in the business of civil construction or the business of erection of plant or machinery or testing or commissioning thereof, in connection with turnkey power projects shall be computed on presumptive basis (Subject to certain conditions).	10% of specified sum shall be deemed to be the presumptive income	Foreign Company
44BBC	Presumptive taxation scheme for the business of operation of cruise ships by non-residents	20% of the specified amounts shall be deemed to be the presumptive income.`	Non-resident
44BBD	Presumptive tax scheme for non-residents providing services or technology to a resident company in India to set up an electronics manufacturing facility or manufacture/produce electronic goods.	25% of the total amount paid or payable to the non-resident for such services or technology would be deemed presumptive income	Non-resident
44C	Deduction for Head office Expenditure (Subject to certain conditions and limits)	Deduction for head-office expenditure shall be limited to lower of following: a) 5% of adjusted total income* b) Head office exp. as attributable to business or profession of taxpayer in India * In case adjusted total income of the assessee is a loss, adjusted total income shall be substituted by average adjusted total income ** Adjusted total income or average adjusted total income shall be computed after prescribed adjustments i.e. unabsorbed depreciations, carry forward losses, etc.	Non-resident
44DA	Deduction of expenditure from royalty and FTS received under an agreement made after 31-03-2003 which is effectively connected to the PE of non-resident in India (Subject to certain conditions)	Expenditure incurred wholly and exclusively for the business of PE or fixed place of profession in India shall be allowed as deduction.	Non-resident

Accounts and Audit

Section	Particulars	Threshold
44AA	Compulsory maintenance of prescribed books of account – Specified Profession (Subject to certain conditions and circumstances)	Persons carrying on specified profession and their gross receipts exceed Rs. 1,50,000 in all the three years immediately preceding the previous year
44AA	Compulsory maintenance of books of account – Other business or profession (Subject to certain conditions and circumstances)	1) If total sales, turnover or gross receipts exceeds Rs. 25,00,000 in any one of the three years immediately preceding the previous year; or 2) If income from business or profession exceeds Rs. 2,50,000 in any one of the three years immediately preceding the previous year
44AB	Compulsory Audit of books of accounts (Subject to certain conditions and circumstances)	1) If total sales, turnover or gross receipts exceeds Rs. 1 Crore in any previous year, in case of business; Threshold limit of Rs. 1 crore shall be increased to Rs. 10 crore in case where the cash receipt and payment made during the year does not exceed 5% of total receipt or payment the business; or 2) If gross receipts exceeds Rs. 50 Lakhs in any previous year, in case of profession. Note: The provision of this section is not applicable to the person, who declares profits and gains in accordance with presumptive taxation Scheme under Section 44AD/44ADA.

Presumptive Taxation

Section	Nature of business	Presumptive income
44AD	Income from eligible business can be computed on presumptive basis if turnover of such business does not exceed two crore rupees. Note: If the amount of cash received during the previous year does not exceed 5% of the total turnover or gross receipt of such year then the threshold limit for total turnover or gross receipt shall be taken as Rs. 3,00,00,000 instead of Rs. 2,00,00,000. Note: If an assessee opts out of the presumptive taxation scheme, after a specified period, he cannot choose to revert back to the presumptive taxation scheme for a period of five assessment years thereafter. [section 44AD(4)] (Subject to conditions)	Presumptive income of eligible business shall be 8% of gross receipt or total turnover. Note: Presumptive income shall be calculated at rate of 6% in respect of total turnover or gross receipts which is received by an account payee cheque or draft or use of electronic clearing system or through any other electronic mode as may be prescribed.
44ADA	Income from eligible profession u/s 44AA(1) can be computed on presumptive basis if the total gross receipts from such profession do not exceed fifty lakh rupees in a previous year. Note: If the amount of cash received during the previous year does not exceed 5% of the total gross receipt of such year then the threshold limit for total gross receipt shall be taken as Rs. 75,00,000 instead of Rs. 50,00,000. (Subject to conditions)	Presumptive income of such profession shall be 50% of total gross receipt.
44AE	Presumptive income from business of plying, hiring or leasing of goods carriage if assessee does not own more than 10 goods carriage.	For Heavy Goods Vehicle: Rs. 1,000 per ton of gross vehicle weight for every month or part of a month during which the heavy goods vehicle is owned by assessee. For Other Goods Vehicle: Rs. 7,500 for every month or part of a month during which the goods carriage is owned by assessee. Note: ‘Heavy goods vehicle’ means goods carriage vehicle the gross vehicle weight of which exceeds 12,000 kilograms.

Deductions available under Chapter VI-A

Section	Nature of deduction	Who can claim
80C	■ Life insurance premium for policy : – in case of individual, on life of assessee, assessee’s spouse and any child of assessee – in case of HUF, on life of any member of the HUF ■ Sum paid under a contract for a deferred annuity : – in case of individual, on life of the individual, individual’s spouse and any child of the individual (however, contract should not contain an option to receive cash payment in lieu of annuity) – in case of HUF, on life of any member of the HUF ■ Sum deducted from salary payable to Government servant for securing deferred annuity or making provision for his wife/children [qualifying amount limited to 20% of salary] ■ Contributions by an individual made under Employees’ Provident Fund Scheme ■ Contribution to Public Provident Fund Account in the name of: – in case of individual, such individual or his spouse or any child of such individual – in case of HUF, any member of HUF ■ Contribution by an employee to a recognised provident fund ■ Contribution by an employee to an approved superannuation fund ■ Subscription to any notified security or notified deposit scheme of the Central Government. For this purpose, Sukanya Samriddhi Account Scheme has been notified vide Notification No. 9/2015, dated 21.01.2015. Any sum deposited during the year in Sukanya Samriddhi Account by an individual would be eligible for deduction. ■ Amount can be deposited by an individual or in the name of girl child of an individual or in the name of the girl child for whom such an individual is the legal guardian. ■ Subscription to notified savings certificates [National Savings Certificates (VIII Issue)] ■ Contribution for participation in unit-linked Insurance Plan of UTI : – in case of an individual, in the name of the individual, his spouse or any child of such individual – in case of a HUF, in the name of any member thereof ■ Contribution to notified unit-linked insurance plan of LIC Mutual Fund [Dhanaraksha 1989] – in the case of an individual, in the name of the individual, his spouse or any child of such individual – in the case of a HUF, in the name of any member thereof ■ Subscription to notified deposit scheme or notified pension fund set up by National Housing Bank [Home Loan Account Scheme/National Housing Banks (Tax Saving) Term Deposit Scheme, 2008] ■ Tuition fees (excluding development fees, donations, etc.) paid by an individual to any university, college, school or other educational institution situated in India, for full time education of any 2 of his/her children ■ Certain payments for purchase/construction of residential house property ■ Subscription to notified schemes of (a) public sector companies engaged in providing long-term finance for purchase/construction of houses in India for residential purposes/(b) authority constituted under any law for satisfying need for housing accommodation or for planning, development or improvement of cities, towns and villages, or for both ■ Sum paid towards notified annuity plan of LIC (New Jeevan Dhara/New Jeevan Dhara-I/New Jeevan Akshay/New Jeevan Akshay-I/New Jeevan Akshay-II/JeewanAkshay-III plan of LIC) or other insurer ■ Subscription to any units of any notified [u/s 10(23D)] Mutual Fund or the UTI (Equity Linked Saving Scheme, 2005) ■ Contribution by an individual to any pension fund set up by any mutual fund which is referred to in section 10(23D) or by the UTI (UTI Retirement Benefit Pension Fund) ■ Subscription to equity shares or debentures forming part of any approved eligible issue of capital made by a public company or public financial institutions ■ Subscription to any units of any approved mutual fund referred to in section 10(23D), provided amount of subscription to such units is subscribed only in ‘eligible issue of capital’ referred to above. ■ Term deposits for a fixed period of not less than 5 years with a scheduled bank, and which is in accordance with a scheme11 framed and notified. ■ Subscription to notified bonds issued by the NABARD. ■ Deposit in an account under the Senior Citizen Savings Scheme Rules, 2004 (subject to certain conditions) ■ 5-year term deposit in an account under the Post Office Time Deposit Rules, 1981 (subject to certain conditions) ■ Contribution to specified account of the pension scheme referred to in 80CCD, in case of central Government employee.	Individual/HUF

Notes:

1. Deduction is limited to whole of the amount paid or deposited subject to a maximum of Rs. 1,50,000. This maximum limit of Rs. 1,50,000 is the aggregate of the deduction that may be claimed under section 80C, 80CCCand 80CCD.

2. The sums paid or deposited need not be out of income chargeable to tax of the previous year. Amount may be paid or deposited any time during the previous year, but the deduction shall be available on so much of the aggregate of sums as do not exceed the total income chargeable to tax during the previous year.

3. Life Insurance premium is part of gross qualifying amount for the purpose of deduction under section 80C. Payment of premium which is in excess of 10 per cent (if policy is issued on or after 1-4-2013, 15% in case of insurance on life of person with disability referred to in section 80Uor suffering from disease or ailment specified in section 80DDB/ rule 11DD) of actual capital sum assured shall not be included in gross qualifying amount. The value of any premiums agreed to be returned or of any benefit by way of bonus or otherwise, over and above the sum actually assured, which is to be or may be received under the policy by any person, shall not be taken into account for the purpose of calculating the actual capital sum assured.

The limit of 10 per cent will be applicable only in the case of policies issued on or after 1-4-2012. In respect of policies issued prior to 1-4-2012, the old limit of 20 per cent of actual sum assured will be applicable.

With effect from 1-4-2013, ‘actual capital sum assured’ in relation to a life insurance policy shall mean the minimum amount assured under the policy on happening of the insured event at any time during the term of the policy, not taking into account—

(i) the value of any premium agreed to be returned; or

(ii) any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person.

4. Where, in any previous year, an assessee—

(i) terminates his contract of insurance, by notice to that effect or where the contract ceases to be in force by reason of failure to pay any premium, by not reviving contract of insurance,—

(a) in case of any single premium policy, within two years after the date of commencement of insurance; or

(b) in any other case, before premiums have been paid for two years; or

(ii) terminates his participation in any unit-linked insurance plan (ULIP), by notice to that effect or where he ceases to participate by reason of failure to pay any contribution, by not reviving his participation, before contributions in respect of such participation have been paid for five years; or

(iii) transfers the house property before the expiry of five years from the end of the financial year in which possession of such property is obtained by him, or receives back, whether by way of refund or otherwise, any sum specified in that clause, then,—

(a) no deduction shall be allowed to the assessee with reference to any of such sums, paid in such previous year; and

(b) the aggregate amount of the deductions of income so allowed in respect of the previous year or years preceding such previous year, shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.

If any equity shares or debentures, with reference to the cost of which a deduction is allowed, are sold or otherwise transferred by the assessee to any person at any time within a period of three years from the date of their acquisition, the aggregate amount of the deductions of income so allowed in respect of such equity shares or debentures in the previous year or years preceding the previous year in which such sale or transfer has taken place shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.

A person shall be treated as having acquired any shares or debentures on the date on which his name is entered in relation to those shares or debentures in the register of members or of debenture-holders, as the case may be, of the public company.

5. If any amount, including interest accrued thereon, is withdrawn by the assessee from his deposit account made under (a) Senior Citizen Saving Scheme or (b) Post Office Time Deposit Rules, before the expiry of the period of five years from the date of its deposit, the amount so withdrawn shall be deemed to be the income of the assessee of the previous year in which the amount is withdrawn and shall be liable to tax in the assessment year relevant to such previous year.

The amount liable to tax shall not include the following amounts, namely:—

(i) any amount of interest, relating to deposits referred to above, which has been included in the total income of the assessee of the previous year or years preceding such previous year; and

(ii) any amount received by the nominee or legal heir of the assessee, on the death of such assessee, other than interest, if any, accrued thereon, which was not included in the total income of the assessee for the previous year or years preceding such previous year.

Section	Nature of deduction	Who can claim
(1)	(2)	(3)
80CCC	Contributions to certain pension funds of LIC or any other insurer (up to Rs. 1,50,000) (subject to certain conditions) (See Note 1 and 2)	Individual
80CCD(See Note 2)	Contribution to pension scheme notified by Central Government up to 10% of salary (subject to certain conditions and limits)(See Note 3) Contribution made by employer shall also be allowed as deduction under 80CCD(2) while computing total income of the employee. However, amount of deduction could not exceed 14% of salary where contribution is made by central/state government and 10%* of salary, where contribution is made by any other employee. *14% in case income of assessee is chargeable to tax under section 115BAC Note: Amount deposited in the minor’s account is also allowed as deduction. The deduction is allowed to the parent subject to a maximum limit of Rs 50,000.	Individual
80CCF	Amount up to Rs. 20,000, paid or deposited, during the previous years relevant to assessment year 2011-12 or 2012-13, as subscription to notified long-term infrastructure bonds	Individual/HUF
80D(See Note 4)	Amount paid (in any mode other than cash) by an individual or HUF to LIC or other insurer to effect or keep in force an insurance on the health of specified person. An individual can also make payment to the Central Government health scheme and/or on account of preventive health check-up (subject to limit) ■ specified person means: – In case of Individual – self, spouse, dependent children or parents – In case of HUF – Any member thereof ■ Deduction for preventive health check-up shall not exceed in aggregate Rs. 5,000. ■ Payment on account of preventive health check-up may be made in cash.	Individual/HUF
80DD	Deduction of Rs. 75,000 (Rs. 1,25,000 in case of severe disability) to a resident individual/HUF where (a) any expenditure has been incurred for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability [as defined under Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995] (w.e.f. assessment year 2005-06 including autism, cerebral palsy and multiple disability as referred to in National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities Act, 1999), or (b) any amount is paid or deposited under an approved scheme framed in this behalf by the LIC or any other insurer or the Administrator or the specified company for the maintenance of a dependent, being a person with disability (subject to certain conditions)	Resident Individual/HUF
80DDB	Expenses actually paid for medical treatment of specified diseases and ailments subject to certain conditions(See Note 5)	Resident Individual/HUF
80E	Amount paid out of income chargeable to tax by way of payment of interest on loan taken from financial institution/approved charitable institution for pursuing higher education (subject to certain conditions) (maximum period : 8 years) (See Note 6)	Individual
80EE	Interest payable on loan taken by an individual from any financial institution for the purpose of acquisition of a residential house property subject to certain condition. (Maximum deduction 50,000)	Individual
80EEA	Interest payable on loan taken by an individual, who is not eligible to claim deduction under 80EE, from any financial institution for the purpose of acquisition of a residential house property subject to certain condition. (Maximum deduction 1,50,000)	Individual
80EEB	Interest payable on loan taken by an individual from any financial institution for the purpose of purchase of an electric vehicle subject to certain condition. (Maximum deduction 1,50,000)	Individual
80G	Donations to certain approved funds, trusts, charitable institutions/donations for renovation or repairs of notified temples, etc. [amount of deduction is 50 per cent of net qualifying amount]. 100 per cent of qualifying donations to National Defence Fund, Prime Minister’s National Relief Fund, Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND) Prime Minister’s Armenia Earthquake Relief Fund, Africa (Public Contributions – India) Fund, National Children’s Fund (from 1-4-2014), Government or approved association for promoting family planning, universities and approved educational institutions of national eminence, National Foundation for Communal Harmony, Chief Minister’s Earthquake Relief Fund (Maharashtra), ZilaSakshartaSamitis, National or State Blood Transfusion Council, Fund set up by State Government to provide medical relief to the poor, Army Central Welfare Fund, Indian Naval Benevolent Fund and Air Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, National Illness Assistance Fund, Chief Minister’s Relief Fund or the Lt. Governor’s Relief Fund in respect of any State or Union Territory, National Sports Fund to be set up by Central Govt., National Cultural Fund, Fund for Technology Development and Application, Indian Olympic Association, etc., fund set up by State Government of Gujarat exclusively for providing relief to victims of earthquake in Gujarat, National Trust for Welfare of Persons with Autism, Cerebral palsy, Mental retardation and Multiple Disabilities, and sums paid between 26-1-2001 and 30-9-2001 to any eligible trust, institution or fund for providing relief to Gujarat earthquake victims, the Swachh Bharat Kosh and the Clean Ganga Fund (from assessment year 2015-16) and National Fund for Control of Drug Abuse (from assessment year 2016-17) [subject to certain conditions and limits](See Note 7)	All assessees
80GG	Rent paid in excess of 10% of total income for furnished/unfurnished residential accommodation (subject to maximum of Rs. 5,000 p.m. or 25% of total income, whichever is less) (subject to certain conditions)	Individuals not receiving any house rent allowance
80GGB	Sum contributed to any political party/electoral trust(See Note 8)	Indian company
80GGC	Sum contributed to any political party/electoral trust (See Note 8)	All assessees, other than local authority and artificial juridical person wholly or partly funded by Government
	For certain incomes
80-IA	Profits and gains from industrial undertakings engaged in infrastructure facility, telecommunication services, industrial park, development of Special Economic Zone, power undertakings, etc. (subject to certain conditions and limits) No deduction under this section shall be available to an enterprise which starts the development or operation and maintenance of the infrastructure facility on or after the 1st day of April, 2017.	All assessees
80-IAB	Profits and gains derived by undertaking/enterprise from business of developing a Special Economic Zone notified on or after 1-4-2005 (subject to certain conditions and limits) No deduction under this section shall be available to an assessee, being a developer, where the development of Special Economic Zone begins on or after the 1st day of April, 2017.	Assessee being Developer of SEZ
80-IAC	Profit and gains derived by an eligible start-up from specified business on or after 1-4-2017 (subject to certain conditions)(See Note 9)	Company and LLP
80-IB	Profits and gains from industrial undertakings, cold storage plant, hotel, scientific research & development, mineral oil concern, housing projects, cold chain facility, multiplex theatres, convention centres, ships, etc. (subject to certain conditions and limits)	All assessees No deduction shall be available to an enterprise which commence the business activity on or after 1-4-2017.
80-IBA	Profits and gains derived by assessee from the business of developing and building affordable housing projects. (subject to certain conditions)	All assessees
80-IC	Profits and gains derived by an undertaking or an enterprise in special category States (Himachal Pradesh, Uttaranchal, Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura) (subject to certain limits, time limits and conditions), (a) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the specified period. (b) which has begun or begins to manufacture or produce any article or thing specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during the specified period	All assessees
80-ID	Profits and gains from business of hotels and convention centres in specified areas (subject to certain conditions).	All assessees
80-IE	Deduction in respect of certain undertakings in North Eastern States.	All assessees
80JJA	Entire income from business of collecting and processing or treating of bio-degradable waste for generating power, or producing bio-fertilizers, bio-pesticides or other biological agents or for producing bio-gas, making pellets or briquettes for fuel or organic manure (for 5 consecutive assessment years)	All assessees
80JJAA	Deduction of 30% of additional employee cost in respect of employment of new employees. Additional employee cost means total emoluments paid or payable to additional employees employed during the previous year. Deduction shall be allowed for first three Assessment Years including the Assessment Year relevant to previous year in which such employment is provided. (Subject to certain other condition)	Assessee to whom section 44AB applies
80LA	Certain incomes of Scheduled banks/banks incorporated outside India having Offshore Banking Units in a Special Economic Zone/Units of International Financial Services Centre (subject to certain conditions and limits)	Scheduled Banks/banks incorporated outside India/Units of International Financial Services Centre
80M	Inter-corporate dividend shall be allowed to be reduced from total income of company receiving the dividend if same is further distributed to shareholders one month prior to the due date of filing of return.	Domestic Company
80P	Specified incomes [subject to varying limits specified in sub-section (2)]	Co-operative societies
80QQB	Royalty income of author of certain specified category of books (up to Rs. 3,00,000) (subject to certain conditions)	Resident Individual – Author
80RRB	Royalty on patents up to Rs. 3,00,000 in the case of a resident individual who is a patentee and is in receipt of income by way of royalty in respect of a patent registered on or after 1-4-2003 (subject to certain conditions).	Resident individuals
80TTA	Interest on deposits in savings bank accounts (up to Rs. 10,000 per year)	Individuals/HUFs (except Senior Citizen)
80TTB	Interest on deposit in saving account or fixed deposit (uptoRs. 50,000 per year)	Senior citizen
80U	Deduction of Rs. 75,000 to a resident individual who, at any time during the previous year, is certified by the medical authority to be a person with disability [as defined under Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995] [w.e.f. assessment year 2005-06 including autism, cerebral palsy, and multiple disabilities as defined under National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities Act, 1999] [in the case of a person with severe disability, allowable deduction is Rs. 1,25,000] (subject to certain conditions).	Resident individuals

Note:

1. Where deduction is claimed under this section, deduction in relation to same amount cannot be claimed under section 80C.

2. section 80CCE provides that the aggregate amount of deductions under section 80C, section 80CCC and section 80CCD(1) shall not, in any case, exceed Rs. 1,50,000

With effect from assessment year 2015-16, amended sub-section (1) has clarified that a non-government employee can claim deduction under section 80CCD even if his date of joining is prior to January 1, 2004.

3. With effect from the assessment year 2012-13 section 80CCEis amended so as to provide that contribution made by the Central Government or any other employer to a pension scheme under sub-section (2) of section 80CCD shall not be included in the limit of deduction of Rs. 1,50,000 provided under section 80CCE.

With effect from assessment year 2016-17, sub-section (1A) of section 80CCD which laid down maximum deduction limit of Rs. 1,00,000 (under sub-section (1)) has been deleted.

Further, a new sub-section (1B) is inserted to provide for additional deduction to the extent of Rs. 50,000. The additional deduction is not subject to ceiling limit of Rs. 1,50,000 as provided under section 80CCE.

However, it is to be noted that addition deduction of Rs. 50,000 shall not be allowed in respect of contribution which is considered for deduction under section 80CCD(1), i.e., within limit of 10% of salary/gross total income

Any payment from NPS to an employee because of closure or his opting out of the pension scheme is chargeable to tax. However, with effect from the assessment year 2017-18, the whole amount received by the nominee from NPS on death of the assessee shall be exempt from tax.

4. Section 80D is amended by the Finance Act, 2018. From assessment year 2019-20 onwards the deduction under Section 80D will be available as per the limit specified below:

Individual	HUF
For self, spouse and dependent children : Rs. 25,000 (Rs. 50,000 if person insured is a senior citizen*);	Premium up to Rs. 25,000 (Rs. 50,000 if member insured is a senior citizen) paid to insure any member of the family.
For parents of the assessee : (Additional) Rs. 25,000 (Rs. 50,000 if person insured is a senior citizen)	NA
Medical expenditure if no amount is paid in respect of health insurance-Rs.50,000 (only in case of senior citizen)	Medical expenditure if no amount is paid in respect of health insurance-Rs.50,000 (only in case of senior citizen)
Aggregate amount of deduction cannot exceed Rs.1,00,000 in any case	Aggregate amount of deduction cannot exceed Rs.50,000 in any case.

*’Senior citizen’ means an individual resident in India who is of the age of sixty years or more at any time during the relevant previous year.

5. Maximum deduction is Rs. 40,000 (Rs. 1,00,000 where expenditure is incurred for a senior citizen [w.e.f assessment year 2019-20])

With effect from assessment year 2016-17, the taxpayer shall be required to obtain a prescription from a specialist doctor (not necessarily from a doctor working in a Government hospital) for availing this deduction.

6. Scope of ‘higher education’ is enlarged with effect from assessment year 2010-11 to cover any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, Board or university recognised by the Central Government or State Government or local authority or by any other authority authorized by the Central Government or State Government or local authority to do so.

With effect from 1-4-2010 the scope of expression ‘relative’ has also been enlarged to cover the student for whom the taxpayer is the legal guardian.

7. With effect from 1-4-2013 no deduction shall be allowed in respect of donation of any sum exceeding two thousand rupees unless such sum is paid by any mode other than cash.

8. With effect from 1-4-2014 deduction will not be allowed if sum is contributed in cash.

9. With effect from Assessment Year 2018-19:

i. ‘Eligible business’ means a business carried out by an eligible start up engaged in innovation, development or improvement of products or processes or services or a scalable business model with a high potential of employment generation or wealth creation.

ii. “Eligible start-up” means a company or a limited liability partnership engaged in eligible business which fulfils the following conditions, namely:

• • it is incorporated on or after the 1st day of April, 2016 but before the 1st day of April, 2030
  • the total turnover of its business does not exceed 100 crore rupees in the previous years in which deduction is claimed; and
  • it holds a certificate of eligible business from the Inter-Ministerial Board of Certification as notified in the Official Gazette by the Central Government.

Depreciation rates

Rates of depreciation

(for income-tax)

AS APPLICABLE FROM THE ASSESSMENT YEAR 2003-04 ONWARDS

Block of assets	Depreciation allowance as percentage of written down value
	AYs 2003-04 to 2005-06	AY 2006-07 to AY 2017-18	AY 2018-19 onwards
1	2	3	4
PART A
TANGIBLE ASSETS
I. BUILDING [See Notes 1 to 4 below the Table]
(1) Buildings which are used mainly for residential purposes except hotels and boarding houses	5	5	5
(2) Buildings other than those used mainly for residential purposes and not covered by sub-items (1) above and (3) below	10	10	10
(3) Buildings acquired on or after the 1st day of September, 2002 for installing machinery and plant forming part of water supply project or water treatment system and which is put to use for the purpose of business of providing infra- structure facilities under clause (i) of sub-section (4) of section 80-IA	100	100	40
(4) Purely temporary erections such as wooden structures	100	100	40
II. FURNITURE AND FITTINGS
Furniture and fittings including electrical fittings [See Note 5 below the Table]	15	10	10
III. MACHINERY AND PLANT
(1) Machinery and plant other than those covered by sub-items (2), (3) and (8) below : [See Note 5A below the Table]	25	15	15
(2) (i) Motor cars, other than those used in a business of running them on hire, acquired or put to use on or after the 1st day of April, 1990 except those covered under entry (ii);	20	15	15
(ii) Motor cars, other than those used in a business of running them on hire, acquired on or after the 23rd day of August, 2019 but before the 1st day of April, 2020 and is put to use before the 1st day of April, 2020.	–	–	30
(3) (i) Aeroplanes – Aeroengines	40	40	40
(ii) (a) Motor buses, motor lorries and motor taxis used in a business of running them on hire other than those covered under entry (b).	40	30	30
(b) Motor buses, motor lorries and motor taxis used in a business of running them on hire, acquired on or after the 23rd day of August, 2019 but before the 1st day of April, 2020 and is put to use before the 1st day of April, 2020.	–	–	45
(iii) Commercial vehicle which is acquired by the assessee on or after the 1st day of October, 1998, but before the 1st day of April, 1999 and is put to use for any period before the 1st day of April, 1999 for the purposes of business or profession in accordance with the third proviso to clause (ii) of sub-section (1) of section 32 [See Note 6 below the Table]	40	40	40
(iv) New commercial vehicle which is acquired on or after the 1st day of October, 1998, but before the 1st day of April, 1999 in replacement of condemned vehicle of over 15 years of age and is put to use for any period before the 1st day of April, 1999 for the purposes of business or profession in accordance with the third proviso to clause (ii) of sub-section (1) of section 32 [See Note 6 below the Table]	60	60	40
(v) New commercial vehicle which is acquired on or after the 1st day of April, 1999 but before the 1st day of April, 2000 in replacement of condemned vehicle of over 15 years of age and is put to use before the 1st day of April, 2000 for the purposes of business or profession in accordance with the second proviso to clause (ii) of sub-section (1) of section 32 [See Note 6 below the Table]	60	60	40
(vi) New commercial vehicle which is acquired on or after the 1st day of April, 2001 but before the 1st day of April, 2002 and is put to use before the 1st day of April, 2002 for the purposes of business or profession [See Note 6 below the Table]	50	50	40
(via) New commercial vehicle which is acquired on or after the 1st day of January, 2009 but before the 1st day of October, 2009 and is put to use before the 1st day of October, 2009 for the purposes of business or profession [See paragraph 6 of the Notes below this Table]	—	50	40
(vii) Moulds used in rubber and plastic goods factories	40	30	30
(viii) Air pollution control equipment, being—
(a) Electrostatic precipitation systems
(b) Felt-filter systems
(c) Dust collector systems	100	100	40
(d) Scrubber-counter current/venturi/packed bed/cyclonic scrubbers
(e) Ash handling system and evacuation system
(ix) Water pollution control equipment, being—
(a) Mechanical screen systems
(b) Aerated detritus chambers (including air compressor)
(c) Mechanically skimmed oil and grease removal systems
(d) Chemical feed systems and flash mixing equipment
(e) Mechanical flocculators and mechanical reactors
(f) Diffused air/mechanically aerated activated sludge systems
(g) Aerated lagoon systems	100	100	40
(h) Biofilters
(i) Methane-recovery anaerobic digester systems
(j) Air floatation systems
(k) Air/steam stripping systems
(l) Urea Hydrolysis systems
(m) Marine outfall systems
(n) Centrifuge for dewatering sludge
(o) Rotating biological contractor or bio-disc
(p) Ion exchange resin column
(q) Activated carbon column
(x) (a) Solidwaste control equipments being – caustic/lime/chrome/mineral/cryolite recovery systems	100	100	40
(b) Solidwaste recycling and resource recovery systems
(xi) Machinery and plant, used in semi-conductor industry covering all integrated circuits (ICs) (excluding hybrid integrated circuits) ranging from small scale integration (SSI) to large scale integration/very large scale integration (LSI/VLSI) as also discrete semi-conductor devices such as diodes, transistors, thyristors, triacs, etc., other than those covered by entries (viii), (ix) and (x) of this sub-item and sub-item (8) below	40	30	30
(xia) Life saving medical equipment, being—
(a) D.C. Defibrillators for internal use and pace makers
(b) Haemodialysors
(c) Heart lung machine
(d) Cobalt Therapy Unit
(e) Colour Doppler
(f) SPECT Gamma Camera
(g) Vascular Angiography System including Digital subtraction Angiography
(h) Ventilator used with anaesthesia apparatus
(i) Magnetic Resonance Imaging System
(j) Surgical Laser [See Note 5B]	40	40	40
(k) Ventilators other than those used with anaesthesia
(l) Gamma knife
(m) Bone Marrow Transplant Equipment including silastic long standing intravenous catheters for chemotherapy
(n) Fibreoptic endoscopes including Paediatric resectoscope/audit resectoscope, Peritoneoscopes, Arthoscope, Microlaryngoscope, Fibreoptic Flexible Nasal Pharyngo Bronchoscope, Fibreoptic Flexible Laryngo Bronchoscope, Video Laryngo Bronchoscope and Video Oesophago Gastroscope, Stroboscope, Fibreoptic Flexible Oesophago Gastroscope
(o) Laparoscope (single incision)
(4) Containers made of glass or plastic used as re-fills	50	50	40
(5) Computers including computer software [See note 7 below the Table]	60	60	40
(6) Machinery and plant, used in weaving, processing and garment sector of textile industry, which is purchased under TUFS on or after the 1st day of April, 2001 but before the 1st day of April, 2004 and is put to use before the 1st day of April, 2004 [See Note 8 below the Table]	50	50	40
(7) Machinery and plant, acquired and installed on or after the 1st day of September, 2002 in a water supply project or a water treatment system and which is put to use for the purpose of business of providing infrastructure facility under clause (i) of sub-section (4) of section 80-IA [See Notes 4 and 9 below the Table]	100	100	40
(8) (i) Wooden parts used in artificial silk manufacturing machinery	100	100	40
(ii) Cinematograph films – bulbs of studio lights	100	100	40
(iii) Match factories – Wooden match frames	100	100	40
(iv) Mines and quarries :
(a) Tubs, winding ropes, haulage ropes and sand stowing pipes	100	100	40
(b) Safety lamps
(v) Salt works – Salt pans, reservoirs and condensers, etc., made of earthy, sandy or clayey material or any other similar material	100	100	40
(vi) Flour mills – Rollers	80	80	40
(vii) Iron and steel industry – Rolling mill rolls	80	80	40
(viii) Sugar works – Rollers	80	80	40
(ix) Energy saving devices, being—
A. Specialised boilers and furnaces:
(a) Ignifluid/fluidized bed boilers
(b) Flameless furnaces and continuous pusher type furnaces
(c) Fluidized bed type heat treatment furnaces	80	80	40
(d) High efficiency boilers (thermal efficiency higher than 75 per cent in case of coal fired and 80 per cent in case of oil/gas fired boilers)
B. Instrumentation and monitoring system for monitoring energy flows:
(a) Automatic electrical load monitoring systems
(b) Digital heat loss meters
(c) Micro-processor based control systems
(d) Infra-red thermography	80	80	40
(e) Meters for measuring heat losses, furnace oil flow, steam flow, electric energy and power factor meters
(f) Maximum demand indicator and clamp on power meters
(g) Exhaust gases analyser
(h) Fuel oil pump test bench
C. Waste heat recovery equipment:
(a) Economisers and feed water heaters
(b) Recuperators and air pre-heaters	80	80	40
(c) Heat pumps
(d) Thermal energy wheel for high and low temperature waste heat recovery
D. Co-generation systems:
(a) Back pressure pass out, controlled extraction, extraction-cum-condensing turbines for co-generation along with pressure boilers	80	80	40
(b) Vapour absorption refrigeration systems
(c) Organic rankine cycle power systems
(d) Low inlet pressure small steam turbines
E. Electrical equipment:
(a) Shunt capacitors and synchronous condenser systems
(b) Automatic power cut off devices (relays) mounted on individual motors
(c) Automatic voltage controller
(d) Power factor controller for AC motors
(e) Solid state devices for controlling motor speeds
(f) Thermally energy-efficient stenters (which require 800 or less kilocalories of heat to evaporate one kilogram of water)
(g) Series compensation equipment
(h) Flexible AC Transmission (FACT) devices – Thyristor controlled series compensation equipment	80	80	40
(i) Time of Day (ToD) energy meters
(j) Equipment to establish transmission highways for National Power Grid to facilitate transfer of surplus power of one region to the deficient region
(k) Remote terminal units/intelligent electronic devices, computer hardware/software, router/bridges, other required equipment and associated communication systems for supervisory control and data acquisition systems, energy management systems and distribution management systems for power transmission systems
(l) Special energy meters for Availability Based Tariff (ABT)
F. Burners:
(a) 0 to 10 per cent excess air burners
(b) Emulsion burners	80	80	40
(c) Burners using air with high pre-heat temperature (above 300°C)
G. Other equipment:
(a) Wet air oxidation equipment for recovery of chemicals and heat
(b) Mechanical vapour recompressors
(c) Thin film evaporators
(d) Automatic micro-processor based load demand controllers	80	80	40
(e) Coal based producer gas plants
(f) Fluid drives and fluid couplings
(g) Turbo charges/super-charges
(h) Sealed radiation sources for radiation processing plants
(x) Gas cylinders including valves and regulators	80	60	40
(xi) Glass manufacturing concerns – Direct fire glass melting furnaces	80	60	40
(xii) Mineral oil concerns:
(a) Plant used in field operations (above ground) distribution – Returnable packages
(b) Plant used in field operations (below ground), but not including kerbside pumps including underground tanks and fittings used in field operations (distribution) by mineral oil concerns	80	60	40
(c) Oil wells not covered in clauses (a) and (b) (with effect from the assessment year 2016-17)	–	15	15
(xiii) Renewal energy devices being—
(a) Flat plate solar collectors
(b) Concentrating and pipe type solar collectors
(c) Solar cookers
(d) Solar water heaters and systems
(e) Air/gas/fluid heating systems
(f) Solar crop driers and systems
(g) Solar refrigeration, cold storages and air-conditioning systems
(h) Solar steels and desalination systems
(i) Solar power generating systems
(j) Solar pumps based on solar-thermal and solar-photovoltaic conversion
(k) Solar-photovoltaic modules and panels for water pumping and other applications	80	80	40
(l) Windmills and any specially designed devices which run on wind-mills installed on or before March 31, 2012
(m) Any special devices including electric generators and pumps running on wind energy installed on or before March 31, 2012
(n) Biogas plant and biogas engines
(o) Electrically operated vehicles including battery powered or fuel-cell powered vehicles
(p) Agricultural and municipal waste conversion devices producing energy
(q) Equipment for utilising ocean waste and thermal energy
(r) Machinery and plant used in the manufacture of any of the above sub-items
(9) (i) Books owned by assessees carrying on a profession—
(a) Books, being annual publications	100	100	40
(b) Books, other than those covered by entry (a) above	60	60	40
(ii) Books owned by assessees carrying on business in running lending libraries	100	100	40
IV. SHIPS
(1) Ocean-going ships including dredgers, tugs, barges, survey launches and other similar ships used mainly for dredging purposes and fishing vessels with wooden hull	25	20	20
(2) Vessels ordinarily operating on inland waters, not covered by sub-item (3) below	25	20	20
(3) Vessels ordinarily operating on inland waters being speed boats [See Note 10 below the Table]	25	20	20
PART B
INTANGIBLE ASSETS
Know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature not being goodwill of businesss of profession	25	25	25

Notes:

1. “Buildings” include roads, bridges, culverts, wells and tubewells.

2. A building shall be deemed to be a building used mainly for residential purposes, if the built-up floor area thereof used for residential purposes is not less than sixty-six and two-third per cent of its total built-up floor area and shall include any such building in the factory premises.

3. In respect of any structure or work by way of renovation or improvement in or in relation to a building referred to in Explanation 1 of clause (ii) of sub-section (1) of section 32, the percentage to be applied will be the percentage specified against sub-item (1) or (2) of item I as may be appropriate to the class of building in or in relation to which the renovation or improvement is effected. Where the structure is constructed or the work is done by way of extension of any such building, the percentage to be applied would be such percentage as would be appropriate, as if the structure or work constituted a separate building.

4. Water treatment system includes system for desalination, demineralisation and purification of water.

5. “Electrical fittings” include electrical wiring, switches, sockets, other fittings and fans, etc.

5A. Rate of depreciation shall be 40% if conditions of Rule 5(2) are satisfied.

5B. Applicable from the Assessment year 2004-05.

6. “Commercial vehicle” means “heavy goods vehicle”, “heavy passenger motor vehicle”, “light motor vehicle”, “medium goods vehicle” and “medium passenger motor vehicle” but does not include “maxi-cab”, “motor-cab”, “tractor” and “road-roller”. The expressions “heavy goods vehicle”, “heavy passenger motor vehicle”, “light motor vehicle”, “medium goods vehicle”, “medium passenger motor vehicle”, “maxi-cab”, “motor-cab”, “tractor” and “road-roller” shall have the meanings respectively as assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988).

7. “Computer software” means any computer programme recorded on any disc, tape, perforated media or other information storage device.

8. “TUFS” means Technology Upgradation Fund Scheme announced by the Government of India in the form of a Resolution of the Ministry of Textiles vide No. 28/1/99-CTI of 31-3-1999.

9. Machinery and plant includes pipes needed for delivery from the source of supply of raw water to the plant and from the plant to the storage facility.

10. “Speed boat” means a motor boat driven by a high speed internal combustion engine capable of propelling the boat at a speed exceeding 24 kilometers per hour in still water and so designed that when running at a speed, it will plane, i.e., its bow will rise from the water.

Depreciation rates for power generating units

(applicable from the assessment year 1998-99

Class of assets	Depreciation allowance as percentage of actual cost
(a) Plant and Machinery in generating stations including plant foundations :—
(i) Hydro-electric	3.4
(ii) Steam electric NHRS & Waste heat recovery Boilers/plants	7.84
(iii) Diesel electric and Gas plant	8.24
(b) Cooling towers and circulating water systems	7.84
(c) Hydraulic works forming part of Hydro-electric system including :—
(i) Dams, spillways weirs, canals, reinforced concrete flumes and syphons	1.95
(ii) Reinforced concrete pipelines and surge tanks steel pipelines, sluice gates, steel surge (tanks), hydraulic control valves and other hydraulic works.	3.4
(d) Building and civil engineering works of permanent character, not mentioned above
(i) Office & showrooms	3.02
(ii) Containing Thermo-electric generating plant	7.84
(iii) Containing Hydro-electric generating plant	3.4
(iv) Temporary erection such as wooden structures	33.4
(v) Roads other than Kutcha roads	3.02
(vi) Others	3.02
(e) Transformers, transformer (Kiosk) sub-station equipment & other fixed apparatus (including plant foundations)
(i) Transformers (including foundations) having a rating of 100 kilo volt amperes and over	7.81
(ii) Others	7.84
(f) Switchgear including cable connections	7.84
(g) Lightning arrestor :
(i) Station type	7.84
(ii) Pole type	12.77
(iii) Synchronous condenser	5.27
(h) Batteries	33.4
(i) Underground cable including joint boxes and disconnectioned boxes	5.27
(ii) Cable duct system	3.02
(i) Overhead lines including supports :
(i) Lines on fabricated steel operating at nominal voltages higher than 66 kilo volts	5.27
(ii) Lines on steel supports operating at nominal voltages higher than 13.2 kilo volts but not exceeding 66 kilo volts	7.84
(iii) Lines on steel or reinforced concrete supports	7.84
(iv) Lines on treated wood supports	7.84
(j) Meters	12.77
(k) Self-propelled vehicles	33.40
(l) Air-conditioning plants :
(i) Static	12.77
(ii) Portable	33.40
(m) (i) Office furniture and fittings	12.77
(ii) Office equipments	12.77
(iii) Internal wiring including fittings and apparatus	12.77
(iv) Street light fittings	12.77
(n) Apparatus let on hire
(i) Other than motors	33.4
(ii) Motors	12.77
(o) Communication equipment :
(i) Radio and high frequency carrier system	12.77
(ii) Telephone lines and telephones	12.77
(p) Any other assets not covered above	7.69

Depreciation under Companies Act, 2013
¹SCHEDULE II²
(See section 123)
USEFUL LIVES TO COMPUTE DEPRECIATION

PART ‘A’

1. Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount of an asset is the cost of an asset or other amount substituted for cost, less its residual value. The useful life of an asset is the period over which an asset is expected to be available for use by an entity, or the number of production or similar units expected to be obtained from the asset by the entity.

2. For the purpose of this Schedule, the term depreciation includes amortisation.

3. Without prejudice to the foregoing provisions of paragraph 1,—

³[(i) The useful life of an asset shall not be longer than the useful life specified in Part ‘C’ and the residual value of an asset shall not be more than five per cent of the original cost of the asset:

Provided that where a company uses a useful life or residual value of the asset which is different from the above limits, justification for the difference shall be disclosed in its financial statement.

(ii) For intangible assets, the provisions of the accounting standards applicable for the time being in force shall apply, except in case of intangible assets (Toll Roads) created under ‘Build, Operate and Transfer’, ‘Build, Own, Operate and Transfer’ or any other form of public private partnership route in case of road projects. Amortisation in such cases may be done as follows:—

(a) Mode of amortisation

Amortisation Amount

Cost of Intangible Assets (A)

Amortisation Amount =

Actual Revenue for the year (B)

Projected Revenue from Intangible Asset (till the end of the concession period) (C)

(b) Meaning of particulars are as follows :—

Cost of Intangible Assets (A)	=	Cost incurred by the company in accordance with the accounting standards.
Actual Revenue for the year (B)	=	Actual revenue (Toll Charges) received during the accounting year.
Projected Revenue from Intangible Asset (C)	=	Total projected revenue from the Intangible Assets as provided to the project lender at the time of financial closure/agreement.

The amortisation amount or rate should ensure that the whole of the cost of the intangible asset is amortised over the concession period.

Revenue shall be reviewed at the end of each financial year and projected revenue shall be adjusted to reflect such changes, if any, in the estimates as will lead to the actual collection at the end of the concession period.

(c) Example:—

Cost of creation of Intangible Assets	:	Rs. 500 Crores
Total period of Agreement	:	20 Years
Time used for creation of Intangible Assets	:	2 Years
Intangible Assets to be amortised in	:	18 Years

Assuming that the Total revenue to be generated out of Intangible Assets over the period would be Rs. 600 Crores, in the following manner:—

Year No.	Revenue (In Rs. Crores)	Remarks
Year 1	5	Actual
Year 2	7.5	Estimate*
Year 3	10	Estimate*
Year 4	12.5	Estimate*
Year 5	17.5	Estimate*
Year 6	20	Estimate*
Year 7	23	Estimate*
Year 8	27	Estimate*
Year 9	31	Estimate*
Year 10	34	Estimate*
Year 11	38	Estimate*
Year 12	41	Estimate*
Year 13	46	Estimate*
Year 14	50	Estimate*
Year 15	53	Estimate*
Year 16	57	Estimate*
Year 17	60	Estimate*
Year 18	67.5	Estimate*
Total	600

‘*’ will be actual at the end of financial year.

Based on this the charge for first year would be Rs. 4.16 Crore (approximately) (i.e. Rs. 5/Rs. 600 × Rs. 500 Crores) which would be charged to profit and loss and 0.83% (i.e. Rs. 4.16 Crore/Rs. 500 Crore × 100) is the amortisation rate for the first year.

Where a company arrives at the amortisation amount in respect of the said Intangible Assets in accordance with any method as per the applicable Accounting Standards, it shall disclose the same.]

PART ‘B’

4. The useful life or residual value of any specific asset, as notified for accounting purposes by a Regulatory Authority constituted under an Act of Parliament or by the Central Government shall be applied in calculating the depreciation to be provided for such asset irrespective of the requirements of this Schedule.

PART ‘C’

5. Subject to Parts A and B above, the following are the useful lives of various tangible assets:

Nature of assets	Useful Life
I. Buildings [NESD]
(a) Buildings (other than factory buildings) RCC Frame Structure	60 Years
(b) Buildings (other than factory buildings) other than RCC Frame Structure	30 Years
(c) Factory buildings	-do-
(d) Fences, wells, tube wells	5 Years
(e) Others (including temporary structure, etc.)	3 Years
II. Bridges, culverts, bunders, etc. [NESD]	30 Years
III. Roads [NESD]
(a) Carpeted roads
(i) Carpeted Roads—RCC	10 Years
(ii) Carpeted Roads—other than RCC	5 Years
(b) Non-carpeted roads	3 Years
IV. Plant and Machinery
(i) General rate applicable to plant and machinery not covered under special plant and machinery
(a) Plant and Machinery other than continuous process plant not covered under specific industries	15 Years
4[(b) Continuous process plant for which no special rate has been prescribed under (ii) below [NESD]	25 Years]
(ii) Special Plant and Machinery
(a) Plant and Machinery related to production and exhibition of Motion Picture Films
1. Cinematograph films—Machinery used in the production and exhibition of cinematograph films, recording and reproducing equipments, developing machines, printing machines, editing machines, synchronizers and studio lights except bulbs	13 Years
2. Projecting equipment for exhibition of films	-do-
(b) Plant and Machinery used in glass manufacturing
1. Plant and Machinery except direct fire glass melting furnaces —
Recuperative and regenerative glass melting furnaces	13 Years
2. Plant and Machinery except direct fire glass melting furnaces — Moulds [NESD]	8 Years
3. Float Glass Melting Furnaces [NESD]	10 Years
(c) Plant and Machinery used in mines and quarries—Portable under ground machinery and earth moving machinery used in open cast mining [NESD]	8 Years
(d) Plant and Machinery used in Telecommunications [NESD]
1. Towers	18 Years
2. Telecom transreceivers, switching centres, transmission and other network equipment	13 Years
3. Telecom—Ducts, Cables and optical fibre	18 Years
4. Satellites	-do-
(e) Plant and Machinery used in exploration, production and refining oil and gas [NESD]
1. Refineries	25 Years
2. Oil and gas assets (including wells), processing plant and facilities	-do-
3. Petrochemical Plant	-do-
4. Storage tanks and related equipment	-do-
5. Pipelines	30 Years
6. Drilling Rig	-do-
7. Field operations (above ground) Portable boilers, drilling tools, well-head tanks, etc.	8 Years
8. Loggers	-do-
(f) Plant and Machinery used in generation, transmission and distribution of power [NESD]
1. Thermal/Gas/Combined Cycle Power Generation Plant	40 Years
2. Hydro Power Generation Plant	-do-
3. Nuclear Power Generation Plant	-do-
4. Transmission lines, cables and other network assets	-do-
5. Wind Power Generation Plant	22 Years
6. Electric Distribution Plant	35 Years
7. Gas Storage and Distribution Plant	30 Years
8. Water Distribution Plant including pipelines	-do-
(g) Plant and Machinery used in manufacture of steel
1. Sinter Plant	20 Years
2. Blast Furnace	-do-
3. Coke ovens	-do-
4. Rolling mill in steel plant	-do-
5. Basic oxygen Furnace Converter	25 Years
(h) Plant and Machinery used in manufacture of non-ferrous metals
1. Metal pot line [NESD]	40 Years
2. Bauxite crushing and grinding section [NESD]	-do-
3. Digester section [NESD]	-do-
4. Turbine [NESD]	-do-
5. Equipments for Calcination [NESD]	-do-
6. Copper Smelter [NESD]	-do-
7. Roll Grinder	40 Years
8. Soaking Pit	30 Years
9. Annealing Furnace	-do-
10. Rolling Mills	-do-
11. Equipments for Scalping, Slitting, etc. [NESD]	-do-
12. Surface Miner, Ripper Dozer, etc., used in mines	25 Years
13. Copper refining plant [NESD]	-do-
(i) Plant and Machinery used in medical and surgical operations [NESD]
1. Electrical Machinery, X-ray and electrotherapeutic apparatus and accessories thereto, medical, diagnostic equipments, namely, Cat- Scan, Ultrasound Machines, ECG Monitors, etc.	13 Years
2. Other Equipments.	15 Years
(j) Plant and Machinery used in manufacture of pharmaceuticals and chemicals [NESD]
1. Reactors	20 Years
2. Distillation Columns	-do-
3. Drying equipments/Centrifuges and Decanters	-do-
4. Vessel/storage tanks	-do-
(k) Plant and Machinery used in civil construction
1. Concreting, Crushing, Piling Equipments and Road Making Equipments	12 Years
2. Heavy Lift Equipments—
Cranes with capacity of more than 100 tons	20 Years
Cranes with capacity of less than 100 tons	15 Years
3. Transmission line, Tunneling Equipments [NESD]	10 Years
4. Earth-moving equipments	9 Years
5. Others including Material Handling /Pipeline/Welding Equipments [NESD]	12 Years
(l) Plant and Machinery used in salt works [NESD]	15 Years
V. Furniture and fittings [NESD]
(i) General furniture and fittings	10 Years
(ii) Furniture and fittings used in hotels, restaurants and boarding houses, schools, colleges and other educational institutions, libraries; welfare centres; meeting halls, cinema houses; theatres and circuses; and furniture and fittings let out on hire for use on the occasion of marriages and similar functions.	8 Years
VI. Motor Vehicles [NESD]
1. Motor cycles, scooters and other mopeds	10 Years
2. Motor buses, motor lorries, motor cars and motor taxies used in a business of running them on hire	6 Years
3. Motor buses, motor lorries and motor cars other than those used in a business of running them on hire	8 Years
4. Motor tractors, harvesting combines and heavy vehicles	-do-
5. Electrically operated vehicles including battery powered or fuel cell powered vehicles	8 Years
VII. Ships [NESD]
1. Ocean-going ships
(i) Bulk Carriers and liner vessels	25 Years
(ii) Crude tankers, product carriers and easy chemical carriers with or without conventional tank coatings	20 Years
(iii) Chemicals and Acid Carriers :
(a) With Stainless steel tanks	25 Years
(b) With other tanks	20 Years
(iv) Liquified gas carriers	30 Years
(v) Conventional large passenger vessels which are used for cruise purpose also	-do-
(vi) Coastal service ships of all categories	-do-
(vii) Offshore supply and support vessels	20 Years
(viii) Catamarans and other high speed passenger for ships or boats	-do-
(ix) Drill ships	25 Years
(x) Hovercrafts	15 Years
(xi) Fishing vessels with wooden hull	10 Years
(xii) Dredgers, tugs, barges, survey launches and other similar ships used mainly for dredging purposes	14 Years
2. Vessels ordinarily operating on inland waters—
(i) Speed boats	13 Years
(ii) Other vessels	28 Years
VIII. Aircrafts or Helicopters [NESD]	20 Years
IX. Railways sidings, locomotives, rolling stocks, tramways and railways used by concerns, excluding railway concerns [NESD]	15 Years
X. Ropeway structures [NESD]	15 Years
XI. Office equipment [NESD]	5 Years
XII. Computers and data processing units [NESD]
(i) Servers and networks	6 Years
(ii) End user devices, such as, desktops, laptops, etc.	3 Years
XIII. Laboratory equipment [NESD]
(i) General laboratory equipment	10 Years
(ii) Laboratory equipments used in educational institutions	5 Years
XIV. Electrical Installations and Equipment [NESD]	10 years
XV. Hydraulic works, pipelines and sluices [NESD]	15 Years

Notes.—

1. “Factory buildings” does not include offices, godowns, staff quarters.

2. Where, during any financial year, any addition has been made to any asset, or where any asset has been sold, discarded, demolished or destroyed, the depreciation on such assets shall be calculated on a pro rata basis from the date of such addition or, as the case may be, up to the date on which such asset has been sold, discarded, demolished or destroyed.

3. The following information shall also be disclosed in the accounts, namely:—

(i) depreciation methods used; and

(ii) the useful lives of the assets for computing depreciation, if they are different from the life specified in the Schedule.4. Useful life specified in Part C of the Schedule is for whole of the asset. Where cost of a part of the asset is significant to total cost of the asset and useful life of that part is different from the useful life of the remaining asset, useful life of that significant part shall be determined separately.

5. ⁵[***]

6. The useful lives of assets working on shift basis have been specified in the Schedule based on their single shift working. Except for assets in respect of which no extra shift depreciation is permitted (indicated by NESD in Part C above), if an asset is used for any time during the year for double shift, the depreciation will increase by 50% for that period and in case of the triple shift the depreciation shall be calculated on the basis of 100% for that period.

7. From the date this Schedule comes into effect, the carrying amount of the asset as on that date—

(a) shall be depreciated over the remaining useful life of the asset as per this Schedule;

(b) after retaining the residual value, shall be recognised in the opening balance of retained earnings where the remaining useful life of an asset is nil.

8. “Continuous process plant” means a plant which is required and designed to operate for twenty-four hours a day.

Notes:

1. Corresponds to Schedule XIV of the 1956 Act.

2. Enforced with effect from 1-4-2014.

3. Substituted for clauses (i) to (iii) vide Notification No. GSR 237(E) [F. No. 17/60/2012-CL-V], dated 31-3-2014, w.e.f. 1-4-2014. Prior to their substitution, clauses (i) to (iii) read as under :

“(i) In case of such class of companies, as may be prescribed and whose financial statements comply with the accounting standards prescribed for such class of companies under section 133 the useful life of an asset shall not normally be different from the useful life and the residual value shall not be different from that as indicated in Part C, provided that if such a company uses a useful life or residual value which is different from the useful life or residual value indicated therein, it shall disclose the justification for the same.

(ii) In respect of other companies the useful life of an asset shall not be longer than the useful life and the residual value shall not be higher than that prescribed in Part C.

(iii) For intangible assets, the provisions of the Accounting Standards mentioned under sub-para (i) or (ii), as applicable, shall apply.”

4. Substituted vide Notification No. GSR 237(E) [F. No. 17/60/2012-CL-V], dated 31-3-2014, w.e.f. 1-4-2014. Prior to its substitution, clause (b) read as under :

“(b) Continuous process plant for which no special rate has been prescribed under (ii) below [NESD] 8 Years”

5. Omitted vide Notification No. GSR 237(E) [F. No. 17/60/2012-CL-V], dated 31-3-2014, w.e.f. 1-4-2014. Prior to its omission, Paragraph 5 read as under :

“5. Depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value. Ordinarily, the residual value of an asset is often insignificant but it should generally be not more than 5% of the original cost of the asset.”

Small Businessmen – Benefits allowable

2.f List of benefits available to Small Businessmen^*

[AY 2026-27]

S.N.	Particulars	Section	Benefits/Deductions allowed
A.	Presumptive Taxation Scheme
1.	Computation of income from eligible business on presumptive basis under Section 44AD (Subject to certain conditions).	44AD	• Presumptive income of eligible business shall be 8 % of gross receipt or total turnover (if turnover or gross receipts of eligible business does not exceed Rs. 2 crore).  • Presumptive income shall be calculated at rate of 6% in respect of total turnover or gross receipts which is received by an account payee cheque or draft or use of electronic clearing system or through such other electronic mode as may be prescribed. Note:If the amount of cash received during the previous year does not exceed 5% of the total turnover or gross receipt of such year then the threshold limit for total turnover shall be taken as Rs. 3 crore instead of Rs. 2 crore. The receipts through the mode of cheque or a bank draft which is not an account payee, shall be considered a receipt in cash for this purpose.
2.	Computation of income from profession on presumptive basis under Section 44ADA (Subject to certain conditions).	44ADA	Presumptive income of profession shall be 50% of gross receipt (if gross receipt of assessee does not exceed Rs. 50 lakh). Note: if the amount of cash received during the previous year does not exceed 5% of the total gross receipt of such year then the threshold limit for total gross receipt shall be taken as Rs. 75,00,000 instead of Rs. 50,00,000. The receipts through the mode of cheque or a bank draft which is not an account payee, shall be considered a receipt in cash for this purpose.
3.	Presumptive income from business of plying, hiring or leasing of goods carriage if assessee does not own more than 10 goods carriage.	44AE	For Heavy Goods Vehicle: Rs. 1,000 per ton of gross vehicle weight for every month or part of a month during which the heavy goods vehicle is owned by assessee For Other Goods Vehicle: Rs. 7,500 for every month or part of a month during which the goods carriage is owned by assessee Note: ‘Heavy goods vehicle’ means goods carriage vehicle the gross vehicle weight of which exceeds 12,000 kilograms.
B.	Deductions from business profits
1.	Rent, rates, taxes, repairs (excluding capital expenditure) and insurance for premises	30	Actual expenditure incurred excluding capital expenditure
2.	Repairs (excluding capital expenditure) and insurance of machinery, plant and furniture	31	Actual expenditure incurred excluding capital expenditure
3.	Depreciation shall be allowed in respect of following assets: i. Tangible Assets (buildings, machinery, plant or furniture); ii. Intangible Assets (know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature not being goodwill of business or profession).	32(1)(i)	Depreciation shall be allowed, to taxpayers engaged in business of generation or generation and distribution of power, at prescribed percentage on actual cost of an asset However, if asset is acquired and put to use for less than 180 days during the previous year, the deduction shall be restricted to 50% of depreciation computed above. Note: Taxpayers engaged in the business of generation or generation and distribution of power shall have the option to claim depreciation either on basis of straight line basis method or written down value method on each block of asset.
4.	Depreciation shall be allowed in respect of following assets: i. Tangible Assets (buildings, machinery, plant or furniture); ii. Intangible Assets (know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature not being goodwill of business or profession).	32(1)(ii)	Depreciation shall be allowed to all taxpayer (except as referred to above) at prescribed percentage on written down value of each block of asset (as per WDV method). However, if asset is acquired and put to use for less than 180 days during the previous year, the deduction shall be restricted to 50% of depreciation computed above.
5.	Additional depreciation shall be allowed to the following assessees in respect of new plant and machinery [other than ships, aircraft, office appliances, second hand plant or machinery, etc.]: a) manufacture or production of any article or thing; or b) generation, transmission or distribution of power (if taxpayer is not claiming depreciation on basis of straight line method)	32(1)(iia)	Additional depreciation to be allowed at 20 % of actual cost of new plant and machinery. However, if an asset is acquired and put to use for less than 180 days during the previous year, 50% of additional depreciation shall be allowed in year of acquisition and balance 50% would be allowed in the next year.
6.	Additional depreciation shall be allowed on new plant and machinery (other than ships, aircraft, vehicle, office appliances, second hand plant or machinery, etc.) shall be allowed subject to certain conditions. Such additional depreciation to be allowed to all taxpayers which set up an undertaking or enterprise for production or manufacture of any article or thing in any notified backward area in the state of Andhra Pradesh, Bihar, Telangana or West Bengal. Note: 1. Manufacturing unit should be set-up on or after April 1, 2015. 2. New plant and machinery should be acquired and installed on or after April 1, 2015 but before April 1, 2020.	Proviso to Section 32(1)(iia)	Additional depreciation to be allowed at 35 % of actual cost of new plant and machinery. However, if an asset is acquired and put to use for less than one 180 days during the previous year, 50% of additional depreciation shall be allowed in year of acquisition and balance 50% in next year.
7.	Investment allowance shall be allowed to a company engaged in business or manufacturing or production of any article or thing (Subject to certain conditions).	32AC	Investment allowance shall be allowed at 15% of actual cost of new asset acquired and installed.
8.	Investment allowance shall be allowed to all taxpayers who acquire new plant and machinery for purpose of setting-up manufacturing unit in notified backward areas in the State of Andhra Pradesh, Bihar, Telangana or West Bengal. Note: 1. New asset should be acquired and installed on or after April 1, 2015 but before April 1, 2020. 2. Manufacturing unit should be set-up on or after April 1, 2015. 3. Deduction shall be allowed under Section 32AD in addition to deduction under Section 32AC if assessee fulfils the specified conditions.	32AD	Investment allowance shall be allowed at 15% of actual cost of investment made in new plant and machinery (other than ships, aircraft, vehicle, office appliances, second hand plant or machinery, etc.)
9.	Insurance premium covering risk of damage or destruction of stocks/stores	36(1)(i)	Actual expenditure incurred
10.	Insurance premium covering life of cattle owned by a member of co-operative society engaged in supplying milk to federal milk co-operative society	36(1)(ia)	Actual expenditure incurred
11.	Medical insurance premium paid by any mode other than cash, to insure employee’s health under (a) scheme framed by GIC of India and approved by Central Government; or (b) scheme framed by any other insurer and approved by IRDA	36(1)(ib)	Actual expenditure incurred
12.	Bonus or commission paid to employees which would not have been payable as profit or dividend if it had not been paid as bonus or commission	36(1)(ii)	Actual expenditure incurred
13.	Interest paid in respect of capital borrowed for the purposes of the business or profession.	36(1)(iii)	Actual amount of interest incurred. Note: If sum is borrowed for acquiring a capital asset, interest thereon pertaining to the period before asset is first put to use shall not be allowed as deduction.
14.	Employer’s contributions to recognized provident fund and approved superannuation fund [subject to certain limits and conditions]	36(1)(iv)	Actual expenditure incurred
15.	Any sum paid by assessee-employer by way of contribution towards a pension scheme, as referred to in section 80CCD, on account of an employee to the extent it does not exceed 10 per cent of the employee’s salary in the previous year.	36(1)(iva)	Actual expenditure incurred subject to the limit of 14 per cent of the employee’s salary* *Salary = Basic Pay + Dearness Allowance (to the extent it forms part of retirement benefits)+ turnover based commission
16.	Contributions to approved gratuity fund (Subject to certain limits and conditions)	36(1)(v)	Actual expenditure incurred
17.	Employer’s contribution to wards approved gratuity fund created exclusively for the benefit of employees under an irrevocable trust shall be allowed as deduction (subject to certain conditions)	36(1)(va)	Actual expenditure incurred not exceeding 8.33% of salary of each employee
18.	Allowance in respect of animals which have died or become permanently useless (Subject to certain conditions)	36(1)(vi)	Actual cost of acquisition of such animals less realization on sale of carcasses of animals
19.	Bad debts which have been written off as irrecoverable in books of accounts. (Subject to certain conditions) Note: W.e.f. assessment year 2016-17, bad-debts shall be allowed as deduction even if they are not written-off from books of accounts. Such deduction shall be allowed if amount of debt or part thereof has been taken into account in computing income on the basis of Income Computation and Disclosure Standards notified under section 145(2) without recording the same in the accounts.	36(1)(vii)	Actual bad debts which have been written off from books of accounts
20.	Securities Transaction Tax paid	36(1)(xv)	Actual expenditure incurred if corresponding income is included as income under the head profits and gains of business or profession
21.	Amount equal to commodities transaction tax paid by an assessee in respect of taxable commodities transactions entered into in the course of his business during the previous year is allowed as deduction	36(1)(xvi)	Actual expenditure incurred if corresponding income is included as income under the head profits and gains of business or profession
22.	Amount of expenditure incurred by a co-operative society (engaged in business of manufacture of sugar) for purchase of sugarcane.	36(1)(xvii)	Deduction would be allowed the extent of lower of following: a) Actual purchase price of sugarcane, or b) Price of sugarcane fixed or approved by the Government
23.	Marked to market loss or other expected loss as computed in accordance with the ICDS notified under section 145(2)	36(1)(xviii)	Marked to Market loss or Expected Loss
24.	Any other expenditure [not being personal or capital expenditure and expenditure mentioned in sections 30 to 36] laid out wholly and exclusively for purposes of business or profession	37(1)	Actual expenditure incurred
25.	Interest, salary, bonus, commission or remuneration paid to partners (subject to certain conditions and limits)	40(b)	a) Interest, in accordance with terms of partnership deed but not exceeding simple interest at 12 per annum b) Remuneration to working partners: ■ If book profit is negative: Rs. 3,00,000 ■ If book profit is positive: (i) Rs. 3,00,000 or 90% of book profit, whichever is more, on first Rs. 6 lakhs of book profit (ii) 60% of balance book profit
C.	Maintenance of books of accounts and audit thereof
1.	Compulsory maintenance of prescribed books of account – Specified Profession (Subject to certain conditions and circumstances)	44AA	Persons carrying on specified profession
2.	Compulsory maintenance of books of account – Other business or profession (Subject to certain conditions and circumstances)	44AA	1) If the total sales, turnover or gross receipts exceeds Rs 10,00,000 in any one of the three years immediately preceding the previous year; or  2) If the income from business or profession exceeds Rs 1,20,000 in any one of the three years immediately preceding the previous year. Note: Individuals or HUFs shall be required to maintain books of account only when either their gross turnover/gross receipts exceed Rs 2,50,0000 or their income from business or profession exceed Rs 2,50,000.
3.	Compulsory Audit of books of accounts (Subject to certain conditions and circumstances)	44AB	1) If total sales, turnover or gross receipts exceeds Rs. 1 Crore in any previous year, in case of business; or  2) If gross receipts exceeds Rs. 50 Lakhs in any previous year, in case of profession. Note:  a) This section is not applicable to the person, who opts for presumptive taxation Scheme under Section 44AD/44ADA.  b) Threshold limit of Rs. 1 crore shall be increased to Rs. 10 crore in case where the cash receipt and payment made during the year does not exceed 5% of total receipt or payment the business
D.	Exemptions and Deductions
1.	Amount received by individual member from HUF. [Subject to the provisions of Section 64(2)]	10(2)	Entire amount is exempt from tax
2.	Share of profit received by partners from a partnership firm.	10(2A)	Entire amount is exempt from tax
3.	Any sum of money or immovable property or movable property received on or after April 1, 2017 without consideration or for inadequate consideration*** from a relative or member of HUF (subject to certain conditions and circumstances). Note: Any sum of money or immovable property or movable property received on or after April 1, 2017 without consideration or for inadequate consideration*** from a relative or member of HUF (subject to certain conditions and circumstances). Note: 1. In case of immovable property, ‘inadequate consideration’ shall mean difference between stamp duty value and actual consideration, if it exceeds Rs. 50,000 or amount equal to 10% of consideration, whichever is higher. 2. Any sum of money received by an individual, from any person, in respect of any expenditure actually incurred by him on his medical treatment or treatment of any member of his family in respect of any illness related to COVID-19, shall not be considered as income of such person. (subject to certain conditions) 3. Any sum of money received by family member of a person who died due to COVID-19, the money so received shall not be considered as income of the family member where such money is received from the employer of deceased person. Where the money is received from any other person or persons, the exemption amount shall be limited to Rs. 10 lakh in aggregate. (subject to certain conditions)	56(2)(x)	The whole amount received from specified relatives or in specified circumstances shall not be included in taxable income.
4.	Rent paid for furnished/unfurnished residential accommodation (Subject to certain conditions)	80GG	Least of the following shall be exempt from tax: a) Rent paid in excess of 10% of total income*; b) 25% of the Total Income; or c) Rs. 5,000 per month. Total Income = Gross total income minus long term capital gains, short term capital gains under section 111A, deductions under sections 80C to 80U (other than 80GG) and income under section 115A
5.	Deduction in respect of employment of new employees.	80JJAA	Deduction shall be allowed at 30% of additional employee cost paid for first three Assessment years. Note: “Additional employee cost” means total emoluments paid or payable to additional employees employed during the previous year. Provided that in case of existing business, the additional employee cost shall be nil if – (a) There is no increase in the number of employees from the total number of employees employed as on the last day of the preceding year ; (b) Emoluments are paid otherwise than by an account payee cheque or account payee bank draft or by use of electronic clearing system through bank account or through such electronic mode as may be prescribed. (Subject to other conditions)
6.	Deduction in respect of eligible start-up (subject to certain conditions) Note: 1. Eligible start-up means a company or a limited liability partnership, incorporated on or after 1/4/2016 but before 1/4/2030, whose total turnover doesn’t exceed Rs. 100 crores in the previous year in which deduction is claimed by that start-up and it holds a certificate from Inter-Ministerial Board of Certification. 2. The deduction is available for any 3 consecutive assessment years out of 10 years beginning from the year in which the eligible start-up is incorporated.	80- IAC	Deduction of 100% of the profit and gains derived by an eligible start-up from a business involving innovation, development, deployment or commercialization of new products, process or services driven by technology or intellectual property rights.
7.	Deductions in respect of profits and gains arising from housing projects	80-IBA	Deduction of 100% of the profits and gains derived by assessee from the business of developing and building affordable housing projects.
E.	Tax Deducted at Source and Advance Tax
1.	Lower rate of TDS under Section 194C in case of payments to a contractor or sub-contractor (Subject to certain conditions) Tax is required to be deducted only if sum paid exceeds Rs. 30,000 or aggregate of sum paid during the financial year exceeds 75,000 (Rs. 100,000 from 01.06.2016).	194C	Deduction of tax at source at 1% if recipient is an Individual or HUF
2.	No TDS from sum paid or payable to contractor who is in the business of plying, hiring or leasing goods carriage and owns ten or less goods carriages at any time during the previous year	194C	No TDS if such contractor owns ten or less goods carriages and furnishes a dedication to that effect after alongwith PAN
3.	No TDS from interest paid on debentures issued by a company in which public are substantially interested. Provided interest is paid by account payee cheque to an individual and HUF.	193	No TDS if interest during the financial year does not exceed Rs. 5,000
3A.	No TDS from interest paid on securities	193	No TDS if the amount of interest does not exceed Rs. 10,000 for a single payment or in the aggregate in a financial year
3B.	No TDS from interest on 8% Saving (Taxable) Bonds 2003, 7.75% Savings (Taxable) Bonds, 2018, Floating Rate Savings Bonds, 2020 (Taxable) or any other notified security paid to a resident persons	193	If amount paid or payable during the financial year does not exceed Rs. 10,000
3C.	No TDS from dividend paid by any mode other than cash to resident persons.	194	No TDS if amount paid or payable during the financial year does not exceed Rs. 10,000.
4.	No obligation to deduct tax at source under Section 194A, 194C, 194H, 194-I and 194J if an Individual or HUF carries on a business or profession and total sales, turnover or gross receipts from such business or profession does not exceed, Rs. 1 crore in case of business and Rs. 50 lakhs in case of profession, during the financial year immediately preceding the financial year in which sum is to be credited or paid.	–	Not liable to deduct tax at source
4A.	No TDS from payment to participants of e-commerce	194-O	If amount paid or payable to resident Individual or HUF during the financial year does not exceed Rs. 5 Lakhs
4B.	No obligation to deduct tax by an Individual* or HUF* responsible for paying any sum to any resident for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract, by way of commission (not being insurance commission referred to in section 194D) or brokerage or by way of fees for professional services. * Other than those who are required to deduct income-tax as per the provisions of section 194C, section 194H, or section 194J	194M	No tax shall be deducted from specified payments if the aggregate of sum paid or credited during the year doesn’t exceed Rs. 50 lakhs
4C.	No obligation to file return of income by a senior citizen (whose age is 75 years or more) if:  a) His total income consists only income in the nature of pension and interest received or receivable from any account maintained with deductor (such bank); and  a) Tax on such income is deducted by deductor on the basis of rates in force.	194P	No obligation to file return of income
4D.	No TDS if amount paid or payable to resident seller for purchase of goods during the Financial Year if aggregate value of goods doesn’t exceed Rs. 50 lakhs	194Q	No TDS from payment made to resident seller
4E.	No TDS if aggregate value of benefit/perquisite provided during the Financial Year doesn’t exceed Rs. 20,000	194R	No TDS in case any benefit or perquisite is provided to a resident
4F.	No tax shall be deducted under this provision in the following circumstance: • If the consideration is payable by any person (other than a specified person) and its aggregate value does not exceed Rs. 10,000 during the financial year. • If the consideration is payable by a specified person and its aggregate value does not exceed Rs. 50,000 during the financial year Specified person means: (a) An individual or a HUF, whose total sales, gross receipts or turnover does not exceed Rs. 1 crore in case of business or Rs. 50 lakhs in case of a profession, during the financial year immediately preceding the financial year in which virtual digital asset is transferred; (b) An individual or a HUF who does not have any income under the head profits and gains of business or profession	194S	No TDS from payment on transfer of Virtual Digital Asset
4G.	No TDS on payment made to partners of Firms	194T	If amount or aggregate of amount paid/ payable during the financial year does not exceed Rs. 20,000.
5.	No deduction of tax shall be made under Sections 194 and 194EE, if resident individual furnishes to the payer a written declaration in prescribed form that tax on his estimated total income of the previous year will be nil.	197A(1)	No tax shall be deducted from specified payments if the sum paid does not exceed the maximum amount which is not chargeable to tax
6.	No deduction of tax shall be made under sections 192A, 193, 194, 194A, 194D, 194DA, 194EE, 194-I and 194K if resident senior citizen furnishes to the payer a written declaration in prescribed form that tax on his estimated total income of the previous year will be nil.	197A(1C)	No tax shall be deducted from specified payments
7.	Exemption from payment of advance tax by a resident senior citizen or resident super senior citizen not having any income from business or profession (who is at least 60 Years of age at any time during the previous year)	207(2)	Not liable to pay advance tax
8.	No need to pay advance tax in installments by assessee who has opted for presumptive taxation scheme under Section 44AD or 44ADA	44AD/44ADA	Whole amount of advance tax can be paid in one installment on or before 15th March of the financial year
9.	Liability for payment of advance tax	208	Taxpayer is liable to advance tax only if his advance tax liability is Rs. 10,000 or more
F.	Basic exemption limits
1.	Maximum amount of income which is not chargeable to Income-tax	Rs. 2,50,000	Individual/HUF taxpayer
1A.	Maximum amount of income which is not chargeable to Income-tax in case of person whose total income is chargeable to tax under section 115BAC	Rs. 4,00,000	Individual, HUF/ AOP/ BOI/ Artificial Juridical Person
2.	Maximum amount of income which is not chargeable to Income-tax in the hands of a resident senior citizen (who is at least 60 Years of age at any time during the previous year but less than 80 Years of age on the last day of the previous year)	Rs. 3,00,000	Resident Senior Citizen
3.	Maximum amount of income which is not chargeable to Income-tax in the hands of a resident super senior citizen (who is at least 80 Years of age at any time during the previous year)	Rs. 5,00,000	Resident Super Senior Citizen
4.	Rebate to resident individual whose total income does not exceed Rs. 5,00,000 [Section 87A]	Tax payable subject to maximum of rebate Rs. 12,500	Resident Individual
4A.	Rebate to resident individual whose total income chargeable to tax under section 115BAC(1A) does not exceed Rs. 12,00,000 [Section 87A]	Tax payable subject to maximum of rebate Rs. 60,000 Note: The total rebate under section 87A shall not exceed the amount of income tax payable as per the rates provided in section 115BAC(1A) [effective from AY 2026-27]	Resident Individual
5.	HUF is assessed to tax as a separate entity	HUF is treated as a person distinct from Individual members or Karta.	HUF
6.	Concessional tax regime under section 115BAC	Option for payment of taxes at reduced rates (subject to certain conditions)	Individual, HUF/AOP/ BOI/Artificial Juridical Person
G.	Concessional tax rate for domestic company and co-operative society
1.	Concessional rate of tax for domestic company if –  (i) Such company has been set-up and registered on or after March 1, 2016; and (ii) It is engaged in business of manufacturing or production of any article or thing (Subject to certain other conditions)	115BA	Income shall, at the option of such company, be computed at concessional tax rate of 25%.
2.	Concessional rate of tax for domestic company, if total turnover or gross receipt in the previous year 2023-24 does not exceed Rs. 400 Crores.	First Schedule of Finance Act, 2025	Rate of income tax shall be 25% of total income.
3.	Concessional rate of tax for domestic company if total income of the company is computed without providing for specified deductions or exemptions	115BAA	Rate of income tax shall be 22% of total income.
4.	Concessional rate of tax for domestic manufacturing company if: a) Such Co. incorporated on or after 01-10-2019; b) It should commence the manufacturing or production of an article or thing on or after 01-10-2019 but before 31-03-2024; c) It must be engaged in the business of manufacture or production of any article or thing and research in relation to, or distribution of, such article or thing manufactured or produced by it; or generation of electricity; d) The total income of the company is computed without providing for specified deductions or exemptions (Subject to certain other conditions)	115BAB	Rate of income tax shall be 15% of total income.
5.	Concessional rate of tax for resident co-operative society if total income of the company is computed without providing for specified deductions or exemptions	115BAD	Rate of income tax shall be 22% of total income.
6.	Concessional rate of tax for resident co-operative societies engaged in the manufacturing or production of an article or thing if total income of the company is computed without providing for specified deductions or exemptions	115BAE	Rate of income tax shall be 15% of total income.

H. Exemption from e-filing of return of income

Form Assessment year 2019-20, every taxpayer has to file Income-tax return electronically except a super senior citizen (i.e., an Individual whose age is 80 years or above at any time during the previous year 2018-19) who furnish the return in ITR-1 or ITR-4

Deductions allowable to tax payer

DEDUCTIONS^*

[AY 2026-27]

Section	Nature of deduction	Who can claim
(1)	(2)	(3)
	Against ‘salaries’
16(ia)	Standard Deduction (a) In case of normal tax regime – Rs. 50,000 or the amount of salary, whichever is lower; (b) In case of new tax regime under section 115BAC(1A)(ii) – Up to Rs. 75,000 or the amount of salary, whichever is lower	Individual – Salaried Employee & Pensioners
16(ii)	Entertainment allowance [actual or at the rate of 1/5th of salary, whichever is less] [limited to Rs. 5,000]	Government employees
16(iii)	Employment tax	Salaried assessees
	Against ‘income from house properties’
23(1), first proviso	Taxes levied by local authority and borne by owner if paid in relevant previous year	All assessees
24(a)	Standard deduction [30% of the annual value (gross annual value less municipal taxes)]	All assessees
24(b)	Interest on borrowed capital (Rs. 30,000/Rs. 2,00,000, subject to specified conditions)	All assessees
25A(2)	Standard deduction of 30 per cent of arrears of rent or unrealised rent received	All assessees
	Against ‘profits and gains of business or profession’ A. Deductible items
30	Rent, rates, taxes, repairs (excluding capital expenditure) and insurance for premises	All assessees
31	Repairs (excluding capital expenditure) and insurance of machinery, plant and furniture	All assessees
32(1)(i)	Depreciation1 in respect of following assets shall be allowed at prescribed percentage on actual cost of an asset (i.e., Straight Line Method): i. Tangible Assets (buildings, machinery, plant or furniture); ii. Intangible Assets (know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature not being goodwill of business or profession). However, if asset is acquired and put to use for less than 180 days during the previous year, the deduction shall be restricted to 50% of depreciation computed above. Note: Taxpayers engaged in business of generation or generation and distribution of power have the option to claim depreciation on written down value basis also	Taxpayer engaged in business of generation or generation and distribution of power.
32(1)(ii)	Depreciation1 in respect of following assets shall be allowed at prescribed percentage on written down value of each block of asset (as per WDV method): i. Tangible Assets (buildings, machinery, plant or furniture); ii. Intangible Assets (know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature not being goodwill of business or profession). However, if asset is acquired and put to use for less than 180 days during the previous year, the deduction shall be restricted to 50% of depreciation computed above.	All assessees engaged in business or profession
32(1)(iia)	Additional depreciation shall be allowed at 20% of actual cost of new plant and machinery [other than ships, aircraft, office appliances, second hand plant or machinery, etc.] (Subject to certain conditions). However, if an asset is acquired and put to use for less than 180 days during the previous year, 50% of additional depreciation shall be allowed in year of acquisition and balance 50% would be allowed in the next year.	All taxpayers engaged in: a) manufacture or production of any article or thing; or b) generation, transmission or distribution of power (if taxpayer is not claiming depreciation on straight line basis ).
33AB	Tea/Coffee/Rubber Development Account – Amount deposited in account with National Bank (Special Account) or in Deposit Account of Tea Board, Coffee Board or Rubber Board in accordance with approved scheme or 40% of profits of business, whichever is less (subject to certain conditions)	Assessees engaged in business of growing and manufacturing Tea/Coffee/Rubber in India
33ABA	Amount deposited in Special Account with SBI/Site Restoration Account or 20 per cent of profits, whichever is less (subject to certain conditions)	Assessee carrying on business of prospecting for, or extraction or production of, petroleum or natural gas or both in India
35(1)(i)	Revenue expenditure on scientific research pertaining to business of assessee is allowed as deduction (Subject to certain conditions). Note: Expenditure on scientific research incurred within 3 years before commencement of business (in the nature of purchase of materials and salary of employees other than perquisite) is allowed as deduction in the year of commencement of business to the extent certified by prescribed authority.	All assessee
35(1)(ii)26	100% of contribution made to approved research association, university, college or other institution to be used for scientific research shall be allowed as deduction (Subject to certain conditions)	All assessee
35(1)(iia)	100% of contribution made to an approved company registered in India to be used for the purpose of scientific research is allowed as deduction (Subject to certain conditions)	All assessee
35(1)(iii)	100% of contribution made to approved research association, university, college or other institution with objects of undertaking statistical research or research in social sciences shall be allowed as deduction (Subject to certain conditions)	All assessee
35(1)(iv) read with 35(2)	Capital expenditure incurred during the year on scientific research relating to the business carried on by the assessee is allowed as deduction (Subject to certain conditions) Capital expenditure incurred within 3 years before commencement of business is allowed as deduction in the year of commencement of business. Note: i. Capital expenditure excludes acquisition of land and acquisition of any interest in land; ii. No depreciation shall be allowed on the assets acquired with the capital expenditure deductible under this provision..	All assessee
35(2AA)26	100% of payment made to a National Laboratory or University or an Indian Institute of Technology or a specified person is allowed as deduction (Subject to certain conditions). The payment should be made with the specified direction that the sum shall be used in scientific research undertaken under an approved programme.	All assessee
35(2AB)26	100% of any expenditure incurred by a company on scientific research (including capital expenditure other than on land and building) on in-house scientific research and development facilities as approved by the prescribed authorities shall be allowed as deduction (Subject to certain conditions). Note: Company should enter into an agreement with the prescribed authority for co-operation in such research and development and fulfils such conditions with regard to maintenance of accounts and audit thereof and furnishing of reports in such manner as may be prescribed;	Company engaged in business of bio-technology or in any business of manufacturing or production of eligible articles or things
35ABA	Capital expenditure incurred and actually paid for acquiring any right to use spectrum for telecommunication services shall be allowed as deduction over the useful life of the spectrum in equal instalments	All Assessee engaged in telecommunication services
35ABB	Expenditure incurred for obtaining licence to operate telecommunication services either before commencement of such business or thereafter at any time during any previous year	All assessees
35AD	Capital expenditure incurred, wholly and exclusively, for the purpose of any specified business [setting up and operating a cold chain facility; setting up and operating a warehousing facility for storage of agricultural produce; laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network; building and operating, anywhere in India, a hotel of two-star or above category as classified by the Central Government; building and operating, anywhere in India, a hospital with at least one hundred beds for patients; developing and building a notified housing project under a scheme for slum redevelopment or rehabilitation framed by the Government, as the case may be, in accordance with prescribed guidelines; developing and building a notified housing project under a scheme for affordable housing framed by the Government, as the case may be, in accordance with prescribed guidelines; production of fertilizer in India; setting up and operating an inland container depot or a container freight station which is approved/notified under the Customs Act, 1962; bee-keeping and production of honey and beeswax; and setting up and operating a warehousing facility for storage of sugar. Lying and operating a slurry pipeline for the transportation of iron ore; setting-up and operating a notified semi-conductor wafer fabrication manufacturing unit; developing or maintaining and operating or developing, maintaining and operating a new infrastructure facility4, carried on by the assessee during the previous year in which such expenditure is incurred (subject to certain conditions) Note: No deduction of any capital expenditure above Rs 10,000 shall be allowed where such expenditure is incurred otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed.	All assessees Note: Such deduction is available to Indian company in case of following business, namely;- i) Business of laying and operating a cross-country natural gas or crude or petroleum oil pipeline network. ii) Developing or maintaining and operating or developing, maintaining and operating a new infrastructure facility.
35CCA	Payment to associations/institutions for carrying out rural development programmes (subject to certain conditions)	All assessees
35CCC	100% of expenditure on notified agricultural extension project (subject to certain conditions)	All assessees
35CCD	100% of expenditure on notified skill development project (subject to certain conditions)	A company
35D	Amortisation of certain preliminary expenses [deductible in 5 equal annual instalments] (subject to certain conditions)	Indian companies and resident non-corporate assessees
35DD	Amortisation of expenditure incurred after 31-3-1999 in case of amalgamation or demerger in the hands of an Indian company (one-fifth of such expenditure for 5 successive previous years) (subject to certain conditions)	Indian Company
35DDA	Amortisation of expenditure incurred under voluntary retirement scheme in 5 equal annual instalments starting with the year when the expenditure is incurred	All assessees
35E	Expenditure on prospecting, etc., for certain minerals [deductible in ten equal annual instalments] (subject to certain conditions)	Indian companies and resident non-corporate assessees engaged in prospecting, etc., for minerals
36(1)(i)	Insurance premium covering risk of damage or destruction of stocks/stores	All assessees
36(1)(ia)	Insurance premium covering life of cattle owned by a member of co-operative society engaged in supplying milk to federal milk co-operative society	Federal milk co-operative societies
36(1)(ib)	Medical insurance premium paid by any mode other than cash, to insure employee’s health under (a) scheme framed by GIC of India and approved by Central Government; or (b) scheme framed by any other insurer and approved by IRDA	All assessees as employers
36(1)(ii)	Bonus or commission paid to employees	All assessees
36(1)(iii)	Interest on borrowed capital2	All assessees
36(1)(iiia)	Pro rata amount of discount on a zero coupon bond based on tenure of such bond and calculated in prescribed manner	All assessees
36(1)(iv)	Contributions to recognised provident fund and approved superannuation fund [subject to certain limits and conditions]	All assessees as employers
36(1)(iva)	Any sum paid by assessee-employer by way of contribution towards a pension scheme, as referred to in section 80CCD, on account of an employee to the extent it does not exceed 14 per cent of the employee’s salary in the previous year.	All assessees as employers
36(1)(v)	Contributions to approved gratuity fund [subject to certain limits and conditions]	All assessees as employers
36(1)(va)	Contributions to any provident fund or superannuation fund or any fund set up under Employees’ State Insurance Act, 1948 or any other fund for welfare of such employees, received from employees if the same are credited to the employee’s account in relevant fund or funds before due date	All assessees as employers
36(1)(vi)	Allowance in respect of animals which have died or become permanently useless [subject to certain conditions]	All assessees
36(1)(vii)3	Bad debts which have been written off as irrecoverable [subject to limitation in the case of banks and financial institutions]	All assessees
36(1)(viia)	Provision for bad and doubtful debts
	■ up to 8.5 per cent of total income before making any deduction under this clause and Chapter VI-A, and up to 10 per cent of aggregate average advances made by its rural branches	Certain scheduled banks, non-scheduled banks (but other than foreign banks) and co-operative bank (other than primary agricultural credit society or primary co-operative agricultural and rural development bank)
	■ up to 5 per cent (10% in case of Public Financial Institutions, State Financial Corporations and State Industrial Investment Corporations in any of the two consecutive assessment years 2003-04 and 2004-05 – subject to certain conditions) of total income before making any deduction under this clause and Chapter VI-A	Foreign banks/Public financial institutions/State financial corporations/State industrial investment corporations. Non-Banking Financial Company
36(1)(viii)	Amounts transferred to special reserve [subject to certain conditions and maxi-mum of 20 per cent of profits derived from eligible business]	Specified entities, namely, financial corporations/financial corporation which is a public sector company/banking company/co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank/housing finance company/any other financial corporation including a public company
36(1)(ix)	Expenditure for promoting family planning amongst employees (deductible in 5 equal annual instalments in case of capital expenditure)	Companies
36(1)(xii)	Any expenditure (not being in the nature of capital expenditure) incurred by a notified corporation or body corporate, by whatever name called, constituted or established by a Central, State or Provincial Act, for the objects and purposes authorised by the Act under which such corporation or body corporate was constituted or established	Notified corporation or body corporate, by whatever name called, constituted or established by a Central, State or Provincial Act
36(1)(xiv)	Contribution to notified credit guarantee trust fund for small industries	Public financial institution
36(1)(xv)	Securities Transaction Tax paid if corresponding income is included as income under the head ‘Profits and gains of business or profession’	All assessees
36(1)(xvi)	Amount equal to commodities transaction tax paid by an assessee in respect of taxable commodities transactions entered into in the course of his business during the previous year, if the income arising from such transactions is included in the income computed under the head “Profits and gains of business or profession”	All assessees
36(1)(xvii)	Amount of expenditure incurred by a co-operative society for purchase of sugarcane shall be allowed as deduction to the extent of lower of following: a) Actual purchase price of sugarcane; or b) Price of sugarcane fixed or approved by the Government	Co-operative society engaged in business of manufacturing sugar
36(1)(xviii)	Marked to market loss or other expected loss as computed in accordance with the ICDS notified under section 145(2)	All Assessees
37(1)	Any other expenditure [not being personal or capital expenditure and expenditure mentioned in sections 30 to 36] laid out wholly and exclusively for purposes of business or profession5	All assessees
	B. Non-deductible items
37(2B)	Advertisement in souvenir, brochure, tract, pamphlet, etc., of political party	All assessees
40(a)(i)	Interest, royalty, fees for technical services or other chargeable sum payable outside India, or in India to a non-resident or foreign company, on which tax has not been deducted or after deduction, has not been paid on or before the due date of filing of return under section 139(1). Where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted in the previous year but paid in any subsequent year after the expiry of the time prescribed under sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid However, where deductor has failed to deduct the tax and he is not deemed to be an assessee in default under first proviso to section 201(1), then it shall be deemed that the deductor has deducted and paid the tax on the date on which the payee has furnished his return of Income.	All assessees
40(a)(ia)	30% of any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139.	All assessees
	However, where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. However, where deductor has failed to deduct the tax and he is not deemed to be an assessee in default under first proviso to section 201(1), then it shall be deemed that the deductor has deducted and paid the tax on the date on which the payee has furnished his return of Income.
40(a)(ib)	Any sum paid or payable to a non-resident which is subject to a deduction of Equalisation levy would attract disallowance if such sum was paid without deduction of such levy or if it was deducted but not deposited with the Central Government till the due date of filing of return.	All assessees
	However, where in respect of any such sum, Equalisation levy is deducted or deposited in subsequent year, as the case may be, the expenditure so disallowed shall be allowed as deduction in that year.
40(a)(ii)	Rate or tax (including surcharge or cess) levied on the profits or gains of any business or profession	All assessees
40(a)(iib)	Amount paid by way of royalty, licence fee, service fee, privilege fee, service charge or any other fee or charge, by whatever name called, which is levied exclusively on, or any amount which is appropriated, whether directly or indirectly, from a State Government undertaking by the State Government	State Govt. undertakings
40(a)(iii)	Salaries payable outside India, or in India to a non-resident, on which tax has not been paid/deducted at source	All assessees as employers
40(a)(iv)	Payments to provident fund/other funds for employee’s benefit for which no effective arrangements are made to secure that tax is deducted at source on payments made from such funds which are chargeable to tax as ‘salaries’	All assessees as employers
40(a)(v)	Tax actually paid by an employer referred to in section 10(10CC)	All assessees as employers
40(b)	Interest, salary, bonus, commission or remuneration paid to partners (subject to certain conditions and limits)	Firms
40(ba)	Interest, salary, bonus, commission or remuneration paid to members (subject to certain conditions and limits)	Association of persons or body of individuals (except a company or a co-operative society, society registered under Societies Registration Act, etc.)
40A(2)	Expenditure involving payment to relative/director/partner/substantially interested person, etc., which, in the opinion of the Assessing Officer, is excessive or unreasonable	All assessees
40A(3)	100% of payments exceeding Rs. 10,000 (Rs. 35,000 in case of payment made for plying, hiring or leasing goods carriages) made to a person in a day otherwise than by account payee cheque/bank draft or use of electronic clearing system through a bank account or through such other electric mode as may be prescribed (subject to certain conditions)	All assessees
40A(7)	Any provision for payment of gratuity to employees, other than a provision made for purposes of contribution to approved gratuity fund or for payment of gratuity that has become payable during the year (subject to specified conditions)	All assessees as employers
40A(9)	Any sum paid for setting up or formation of, or as contribution to, any fund, trust, company, AOP, BOI, Society or other institution, other than recognised provident fund/approved superannuation fund/pension scheme referred to in section 80CCD/approved gratuity fund	All assessees as employers
40(A)(13)	No deduction shall be allowed in respect of marked to market loss or other unexpected loss except as allowable under section 36(1)(xviii)	All assessee
	C. Other deductible items
42(1)	Allowances specified in agreement entered into by Central Government with any person (subject to certain conditions and terms of agreement)	Assessees engaged in prospecting for or extraction or production of mineral oils
42(2)	Expenditure remaining unclaimed as reduced by proceeds of transfer	Assessee whose business consists of prospecting for or extraction or production of petroleum and natural gas and who transfers any interest in such business
43B	Any sum which is actually paid, relating to (i) tax/duty/cess/fee levied under any law, (ii) contribution to provident fund/superannuation fund/gratuity fund/any fund for employees’ welfare, (iii) bonus/commission to employees, (iv) interest on loan/borrowing from any public financial institution, State Financial Corporation or State Industrial Investment Corporation (v)interest payments to scheduled banks/Co-operative banks (other than a primary agricultural and development bank)/primary co-operative agricultural and rural development bank on loans or advances, (vi) interest on loan or borrowings from NBFC, (vii) sum payable by employers by way of leave encashment to employees, (viii) sum payable to the Indian Railways for the use of railway assets, and (ix) sum payable to a micro or small enterprise beyond the time limit specified in section 15 of MSME Act. Deduction will not be allowed in year in which liability to pay is incurred unless actual payment is made in that year or before the due date of furnishing of return of income for that year Note: However, payment made to micro or small enterprise beyond the time limit shall be allowed as deduction only on actual payment.	All assessees
44A	Expenditure in excess of subscription, etc., received from members (subject to certain conditions and limits)	Trade, professional or similar association
44C	Head office expenditure (subject to certain conditions and limits)	Non-resident
	Against ‘capital gains’
48(i)	Expenditure incurred wholly and exclusively in connection with transfer of capital asset	All assessees
48(ii)	Cost of acquisition of capital asset and of any improvement thereto (indexed cost of acquisition and indexed cost of improvement, in case of long-term capital assets). Note : (1) The cost of acquisition/improvement shall not include the deductions claimed on the amount of interest under Section 24(b) or Chapter VIA. [Subject to exceptions contained in Explanation 1 and 2 to Section 48(iii)]. (2) The benefit of indexed cost of acquisition and indexed cost of improvement shall be available if long-term capital gain arises from the transfer which takes place before 23-07-2024.	All assessees
48(iii)	Deduction in respect of the capital gains charged to tax under section 45(4), which is attributable to the capital asset remaining with the firm	Firm, AOP or BOI
54	Long-term capital gains on sale of residential house and land appurtenant thereto invested in purchase/construction of another residential house8 (subject to certain conditions and limits)	Individual/HUF
54B	Capital gains on transfer of land used for agricultural purposes, by an individual or his parents or a HUF, invested in other land for agricultural purposes (subject to certain conditions and limits)	Individual/HUF
54D	Capital gains on compulsory acquisition of land or building forming part of an industrial undertaking invested in purchase/construction of other land/building for shifting/re-establishing said undertaking or setting up new industrial undertaking (subject to certain conditions and limits)	Any assessee
54EC	Long-term capital gains arising from transfer of land or building. The exemption9 is allowed if the amount of capital gains is invested in bonds of NHAI, REC or any other notified bond.	Any assessee
54EE	Long-term capital gain invested in long-term specified assets being units of such fund as may be notified by Central Government to finance start-ups	All assesses
54F	Net consideration on transfer of long-term capital asset other than residential house invested in residential house10 (subject to certain conditions and limits)	Individual/HUF
54G	Capital gain on transfer of machinery, plant, land or building used for the purposes of the business of an industrial undertaking situate in an urban area (transfer being effected for shifting the undertaking to a non-urban area) invested in new machinery, plant, building or land, in the said non-urban area, expenses on shifting, etc. (subject to certain conditions and limits)	Any assessee
54GA	Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area to any Special Economic Zone (subject to certain conditions and limits)	All assessees
54GB	Exemption in respect of capital gain arising from the transfer of a long-term capital asset, being a residential property (a house or a plot of land), owned by the eligible assessee, and such assessee before the due date of furnishing of return of income under sub-section (1) of section 139 utilises the net consideration for subscription in the equity shares of an eligible company and such company has, within one year from the date of subscription in equity shares by the assessee, utilised this amount for purchase of specified new asset (subject to certain conditions and limits).	Individual/HUF
	W.e.f. April 1, 2017, eligible start-up is also included in definition of eligible company.
	Against ‘income from other sources’ A. Deductible items
57(i)	Deduction from dividend income on account of interest expense, which shall not exceed 20% of the dividend income.	All assessees
57(i)	Any reasonable sum paid by way of commission or remuneration for the purpose of realising interest on securities	All assessees
57(ia)	Contributions to any provident fund or superannuation fund or any fund set up under Employees’ State Insurance Act, 1948 or any other fund for welfare of employees, if the same are credited to employees’ accounts in relevant funds before due date	All assessees
57(ii)	Repairs, insurance, and depreciation of building, plant and machinery and furniture	Assessees engaged in business of letting out of machinery, plant and furniture and buildings on hire
57(iia)	In case of family pension, 331/3 per cent of such pension or Rs. 15,000, whichever is less Note: the enhanced threshold of Rs. 25,000 shall be applicable if income-tax is computed under section 115BAC(1A)(ii).	Assessees in receipt of family pension on death of employee being member of assessee’s family
57(iii)	Any other expenditure (not being capital expenditure) expended wholly and exclusively for earning such income	All assessees
57(iv)	In case of interest received on compensation or on enhanced compensation referred to in section 145A(2), a deduction of 50 per cent of such income (subject to certain conditions)	All assessees
	B. Non-deductible items
58(1)(a)(i)	Personal expenses	All assessees
58(1)(a)(ii)	Interest chargeable to tax which is payable outside India on which tax has not been paid or deducted at source	All assessees
58(1)(a)(iii)	‘Salaries’ payable outside India on which no tax is paid or deducted at source	All assessees
58(1A)	Disallowance due to TDS default (Covered by section 40(a)(ia) and 40(a)(iia))	All assessees
58(2)	Expenditure of the nature specified in section 40A	All assessees
58(4)	Expenditure in connection with winnings from lotteries, crossword puzzles, races, games, gambling or betting	All assessees
	For certain payments
80C	■ Life insurance premium for policy : – in case of individual, on life of assessee, assessee’s spouse and any child of assessee – in case of HUF, on life of any member of the HUF ■ Sum paid under a contract for a deferred annuity : – in case of individual, on life of the individual, individual’s spouse and any child of the individual (however, contract should not contain an option to receive cash payment in lieu of annuity) – in case of HUF, on life of any member of the HUF ■ Sum deducted from salary payable to Government servant for securing deferred annuity or making provision for his wife/children [qualifying amount limited to 20% of salary] ■ Contributions by an individual made under Employees’ Provident Fund Scheme ■ Contribution to Public Provident Fund Account in the name of: – in case of individual, such individual or his spouse or any child of such individual – in case of HUF, any member of HUF ■ Contribution by an employee to a recognised provident fund ■ Contribution by an employee to an approved superannuation fund ■ Subscription to any notified security or notified deposit scheme of the Central Government. For this purpose, Sukanya Samriddhi Account Scheme has been notified vide Notification No. 9/2015, dated 21.01.2015. Any sum deposited during the year in Sukanya Samriddhi Account by an individual would be eligible for deduction. ■ Amount can be deposited by an individual or in the name of girl child of an individual or in the name of the girl child for whom such an individual is the legal guardian. ■ Subscription to notified savings certificates [National Savings Certificates (VIII Issue)] ■ Contribution for participation in unit-linked Insurance Plan of UTI : – in case of an individual, in the name of the individual, his spouse or any child of such individual – in case of a HUF, in the name of any member thereof ■ Contribution to notified unit-linked insurance plan of LIC Mutual Fund [Dhanaraksha 1989] – in the case of an individual, in the name of the individual, his spouse or any child of such individual – in the case of a HUF, in the name of any member thereof ■ Subscription to notified deposit scheme or notified pension fund set up by National Housing Bank [Home Loan Account Scheme/National Housing Banks (Tax Saving) Term Deposit Scheme, 2008] ■ Tuition fees (excluding development fees, donations, etc.) paid by an individual to any university, college, school or other educational institution situated in India, for full time education of any 2 of his/her children ■ Certain payments for purchase/construction of residential house property ■ Subscription to notified schemes of (a) public sector companies engaged in providing long-term finance for purchase/construction of houses in India for residential purposes/(b) authority constituted under any law for satisfying need for housing accommodation or for planning, development or improvement of cities, towns and villages, or for both ■ Sum paid towards notified annuity plan of LIC (New Jeevan Dhara/New Jeevan Dhara-I/New Jeevan Akshay/New Jeevan Akshay-I/New Jeevan Akshay-II/Jeewan Akshay-III plan of LIC) or other insurer ■ Subscription to any units of any notified [u/s 10(23D)] Mutual Fund or the UTI (Equity Linked Saving Scheme, 2005) ■ Contribution by an individual to any pension fund set up by any mutual fund which is referred to in section 10(23D) or by the UTI (UTI Retirement Benefit Pension Fund) ■ Subscription to equity shares or debentures forming part of any approved eligible issue of capital made by a public company or public financial institutions ■ Subscription to any units of any approved mutual fund referred to in section 10(23D), provided amount of subscription to such units is subscribed only in ‘eligible issue of capital’ referred to above. ■ Term deposits for a fixed period of not less than 5 years with a scheduled bank, and which is in accordance with a scheme11 framed and notified. ■ Subscription to notified bonds issued by the NABARD. ■ Deposit in an account under the Senior Citizen Savings Scheme Rules, 2004 (subject to certain conditions) ■ 5-year term deposit in an account under the Post Office Time Deposit Rules, 1981 (subject to certain conditions) ■ Contribution to specified account of the pension scheme referred to in 80CCD, in case of central Government employee.	Individual/HUF

Notes:

1. Deduction is limited to whole of the amount paid or deposited subject to a maximum of Rs. 1,50,000¹². This maximum limit of Rs. 1,50,000¹² is the aggregate of the deduction that may be claimed under sections 80C, 80CCC and 80CCD.

2. The sums paid or deposited need not be out of income chargeable to tax of the previous year. Amount may be paid or deposited any time during the previous year, but the deduction shall be available on so much of the aggregate of sums as do not exceed the total income chargeable to tax during the previous year.

3. Life Insurance premium is part of gross qualifying amount for the purpose of deduction under section 80C. Payment of premium which is in excess of 10 per cent (if policy is issued on or after 1-4-2013, 15% in case of insurance on life of person with disability referred to in section 80U or suffering from disease or ailment specified in section 80DDB/rule 11DD) of actual capital sum assured shall not be included in gross qualifying amount. The value of any premiums agreed to be returned or of any benefit by way of bonus or otherwise, over and above the sum actually assured, which is to be or may be received under the policy by any person, shall not be taken into account for the purpose of calculating the actual capital sum assured.

The limit of 10 per cent will be applicable only in the case of policies issued on or after 1-4-2012. In respect of policies issued prior to 1-4-2012, the old limit of 20 per cent of actual sum assured will be applicable.

With effect from 1-4-2013, ‘actual capital sum assured’ in relation to a life insurance policy shall mean the minimum amount assured under the policy on happening of the insured event at any time during the term of the policy, not taking into account—

(i) the value of any premium agreed to be returned; or

(ii) any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person.

4. Where, in any previous year, an assessee—

(i) terminates his contract of insurance, by notice to that effect or where the contract ceases to be in force by reason of failure to pay any premium, by not reviving contract of insurance,—

(a) in case of any single premium policy, within two years after the date of commencement of insurance; or

(b) in any other case, before premiums have been paid for two years; or

(ii) terminates his participation in any unit-linked insurance plan (ULIP), by notice to that effect or where he ceases to participate by reason of failure to pay any contribution, by not reviving his participation, before contributions in respect of such participation have been paid for five years; or

(iii) transfers the house property before the expiry of five years from the end of the financial year in which possession of such property is obtained by him, or receives back, whether by way of refund or otherwise, any sum specified in that clause,

then,—

(a) no deduction shall be allowed to the assessee with reference to any of such sums, paid in such previous year; and

(b) the aggregate amount of the deductions of income so allowed in respect of the previous year or years preceding such previous year, shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.

If any equity shares or debentures, with reference to the cost of which a deduction is allowed, are sold or otherwise transferred by the assessee to any person at any time within a period of three years from the date of their acquisition, the aggregate amount of the deductions of income so allowed in respect of such equity shares or debentures in the previous year or years preceding the previous year in which such sale or transfer has taken place shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.

A person shall be treated as having acquired any shares or debentures on the date on which his name is entered in relation to those shares or debentures in the register of members or of debenture-holders, as the case may be, of the public company.

5. If any amount, including interest accrued thereon, is withdrawn by the assessee from his deposit account made under (a) Senior Citizen Saving Scheme or (b) Post Office Time Deposit Rules, before the expiry of the period of five years from the date of its deposit, the amount so withdrawn shall be deemed to be the income of the assessee of the previous year in which the amount is withdrawn and shall be liable to tax in the assessment year relevant to such previous year.

The amount liable to tax shall not include the following amounts, namely:—

 (i) any amount of interest, relating to deposits referred to above, which has been included in the total income of the assessee of the previous year or years preceding such previous year; and

(ii) any amount received by the nominee or legal heir of the assessee, on the death of such assessee, other than interest, if any, accrued thereon, which was not included in the total income of the assessee for the previous year or years preceding such previous year.

Section	Nature of deduction	Who can claim
(1)	(2)	(3)
80CCC13	Contributions to certain pension funds of LIC or any other insurer (up to Rs. 1,50,000) (subject to certain conditions)14	Individual
1480CCD	Contribution to pension scheme notified by Central Government up to 10% of salary (subject to certain conditions and limits)15 Contribution made by employer shall also be allowed as deduction under 80CCD(2) while computing total income of the employee. However, amount of deduction could not exceed 14% of salary where contribution is made by central/state government and 10%* of salary, where contribution is made by any other employee. * 14% in case income of assessee is chargeable to tax under section 115BAC(1A) (new tax regime). Note: Amount deposited in the minor’s account is also allowed as deduction. The deduction is allowed to the parent subject to a maximum limit of Rs 50,000.	Individual
80CCH	Amount paid/deposited in Agniveer Corpus Fund by assessee and contribution made by Central Government to such fund	Individual
80D17	Amount paid (in any mode other than cash) by an individual or HUF to LIC or other insurer to effect or keep in force an insurance on the health of specified person. An individual can also make payment to the Central Government health scheme and/or on account of preventive health check-up (subject to limit)	Individual/HUF
	■ specified person means:  – In case of Individual – self, spouse, dependent children or parents  – In case of HUF – Any member thereof  ■ Deduction for preventive health check-up shall not exceed in aggregate Rs. 5,000. ■ Payment on account of preventive health check-up may be made in cash.
80DD	Deduction of Rs. 75,000 (Rs. 1,25,000 in case of severe disability) to a resident individual/HUF where (a) any expenditure has been incurred for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability [as defined under Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995] (w.e.f. assessment year 2005-06 including autism, cerebral palsy and multiple disability as referred to in National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities Act, 1999), or (b) any amount is paid or deposited under an approved scheme framed in this behalf by the LIC or any other insurer or the Administrator or the specified company for the maintenance of a dependent, being a person with disability (subject to certain conditions)	Resident Individual/HUF
80DDB	Expenses actually paid for medical treatment of specified diseases and ailments subject to certain conditions18	Resident Individual/HUF
80E	Amount paid out of income chargeable to tax by way of payment of interest on loan taken from financial institution/approved charitable institution for pursuing higher education19 (subject to certain conditions) (maximum period : 8 years)	Individual
80EE	Interest payable on loan taken by an individual from any financial institution for the purpose of acquisition of a residential house property subject to certain condition. (Maximum deduction 50,000)	Individual
80EEA	Interest payable on loan taken by an individual, who is not eligible to claim deduction under 80EE, from any financial institution for the purpose of acquisition of a residential house property subject to certain condition. (Maximum deduction 1,50,000)	Individual
80EEB	Interest payable on loan taken by an individual from any financial institution for the purpose of purchase of an electric vehicle subject to certain condition. (Maximum deduction 1,50,000)	Individual
80G	Donations to certain approved funds, trusts, charitable institutions/donations for renovation or repairs of notified temples, etc. [amount of deduction is 50 per cent of net qualifying amount]. 100 per cent of qualifying donations to National Defence Fund, Prime Minister’s National Relief Fund, Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND) Prime Minister’s Armenia Earthquake Relief Fund, Africa (Public Contributions – India) Fund, National Children’s Fund (from 1-4-2014), Government or approved association for promoting family planning, universities and approved educational institutions of national eminence, National Foundation for Communal Harmony, Chief Minister’s Earthquake Relief Fund (Maharashtra), Zila Saksharta Samitis, National or State Blood Transfusion Council, Fund set up by State Government to provide medical relief to the poor, Army Central Welfare Fund, Indian Naval Benevolent Fund and Air Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, National Illness Assistance Fund, Chief Minister’s Relief Fund or the Lt. Governor’s Relief Fund in respect of any State or Union Territory, National Sports Fund, National Cultural Fund, Fund for Technology Development and Application, Indian Olympic Association, etc.20, fund set up by State Government of Gujarat exclusively for providing relief to victims of earthquake in Gujarat, National Trust for Welfare of Persons with Autism, Cerebral palsy, Mental retardation and Multiple Disabilities, and sums paid between 26-1-2001 and 30-9-2001 to any eligible trust, institution or fund for providing relief to Gujarat earthquake victims21, the Swachh Bharat Kosh and the Clean Ganga Fund (from assessment year 2015-16) and National Fund for Control of Drug Abuse (from assessment year 2016-17) [subject to certain conditions and limits]22	All assessees
80GG	Rent paid in excess of 10% of total income for furnished/unfurnished residential accommodation (subject to maximum of Rs. 5,000 p.m. or 25% of total income, whichever is less) (subject to certain conditions)	Individuals not receiving any house rent allowance
80GGA23	Certain donations for scientific, social or statistical research or rural development programme or for carrying out an eligible project or scheme or National Urban Poverty Eradication Fund (subject to certain conditions)	All assessees not having any income chargeable under the head ‘Profits and gains of business or profession’
80GGB	Sum contributed to any political party/electoral trust24	Indian company
80GGC	Sum contributed to any political party/electoral trust24	All assessees, other than local authority and artificial juridical person wholly or partly funded by Government
	For certain incomes
80-IA	Profits and gains from industrial undertakings engaged in infrastructure facility, telecommunication services, industrial park, development of Special Economic Zone, power undertakings, etc. (subject to certain conditions and limits)25	All assessees
	No deduction under this section shall be available to an enterprise which starts the development or operation and maintenance of the infrastructure facility on or after the 1st day of April, 2017.
80-IAB	Profits and gains derived by undertaking/enterprise from business of developing a Special Economic Zone notified on or after 1-4-2005 (subject to certain conditions and limits)	Assessee being Developer of SEZ
	No deduction under this section shall be available to an assessee, being a developer, where the development of Special Economic Zone begins on or after the 1st day of April, 2017.
80-IAC	Profit and gains derived by an eligible start-up from specified business (subject to certain conditions)27	Company and LLP
80-IB	Profits and gains from industrial undertakings, cold storage plant, hotel, scientific research & development, mineral oil concern, housing projects, cold chain facility, multiplex theatres, convention centres, ships, etc. (subject to certain conditions and limits)	All assessees No deduction shall be available to an enterprise which commence the business activity on or after 1-4-2017.
80-IBA	Profits and gains derived by assessee from the business of developing and building affordable housing projects. (subject to certain conditions)	All assessees
80-IC	Profits and gains derived by an undertaking or an enterprise in special category States (Himachal Pradesh, Uttaranchal, Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura) (subject to certain limits, time limits and conditions), (a) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the specified period. (b) which has begun or begins to manufacture or produce any article or thing specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during the specified period	All assessees
80-ID	Profits and gains from business of hotels and convention centres in specified areas (subject to certain conditions).	All assessees
80-IE	Deduction in respect of certain undertakings in North Eastern States.	All assessees
80JJA	Entire income from business of collecting and processing or treating of bio-degradable waste for generating power, or producing bio-fertilizers, bio-pesticides or other biological agents or for producing bio-gas, making pellets or briquettes for fuel or organic manure (for 5 consecutive assessment years)	All assessees
80JJAA	Deduction of 30% of additional employee cost in respect of employment of new employees.	Assessee to whom section 44AB applies
	Additional employee cost means total emoluments paid or payable to additional employees employed during the previous year.
	Deduction shall be allowed for first three Assessment Years including the Assessment Year relevant to previous year in which such employment is provided.
	(Subject to certain other condition)
80LA	Certain incomes of Scheduled banks/banks incorporated outside India having Offshore Banking Units in a Special Economic Zone/Units of International Financial Services Centre (subject to certain conditions and limits)	Scheduled Banks/banks incorporated outside India/Units of International Financial Services Centre
80M	Inter-corporate dividend shall be allowed to be reduced from total income of company receiving the dividend if same is further distributed to shareholders within the prescribed period.	Domestic Company
80P	Specified incomes [subject to varying limits specified in sub-section (2)]	Co-operative societies
80PA	Profit derived from processing or marketing of agricultural produce.	Producer Company
80QQB	Royalty income of author of certain specified category of books (up to Rs. 3,00,000) (subject to certain conditions)	Resident Individual – Author
80RRB	Royalty on patents up to Rs. 3,00,000 in the case of a resident individual who is a patentee and is in receipt of income by way of royalty in respect of a patent registered on or after 1-4-2003 (subject to certain conditions).	Resident individuals
80TTA	Interest on deposits in savings bank accounts (up to Rs. 10,000 per year)	Individuals/HUFs (except Senior Citizen)
80TTB	Interest on deposit in saving account or fixed deposit (upto Rs. 50,000 per year)	Senior citizen
80U	Deduction of Rs. 75,000 to a resident individual who, at any time during the previous year, is certified by the medical authority to be a person with disability [as defined under Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995] [w.e.f. assessment year 2005-06 including autism, cerebral palsy, and multiple disabilities as defined under National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities Act, 1999] [in the case of a person with severe disability, allowable deduction is Rs. 1,25,000] (subject to certain conditions).	Resident individuals
	Rebates
87A	Tax rebate in case of individual resident in India, whose total income does not exceed Rs. 5,00,000. Quantum of rebate shall be an amount equal to hundred per cent of such income-tax or an amount of Rs. 12,500, whichever is less. Further, a maximum rebate of Rs. 60,000 is allowed under 87A from the amount of income tax on total income, which is chargeable to tax under section 115BAC(1A). However, this rebate is allowed if the total income of assessee chargeable to tax under section 115BAC(1A) is up to Rs. 12,00,000. Note: The total rebate under section 87A shall not exceed the amount of income tax payable as per the rates provided in section 115BAC(1A) [effective from AY 2026-27]	Resident Individual

Notes:

1. Provisions of section 32 shall apply whether or not the assessee has claimed depreciation.

2. If sum is borrowed for acquiring a capital asset, interest thereon pertaining to the period before asset is first put to use shall not be allowed as deduction.

3. W.e.f. assessment year 2016-17, bad-debts shall be allowed as deduction even if they are not written-off from books of accounts. Such deduction shall be allowed if amount of debt or part thereof has been taken into account in computing income on the basis of Income Computation and Disclosure Standards notified under section 145(2) without recording the same in the accounts.

4. With effect from assessment year 2018-19 business of developing or maintaining and operating or developing, maintaining and operating a new infrastructure facility, has been included.

 ♦ Section 35AD was amended by Finance (No. 2) Act, 2014 with effect from assessment year 2015-16 :

With a view to ensure that the capital asset on which investment linked deduction has been claimed is used for the purposes of the specified business, sub-section (7A) has been inserted in section 35AD to provide that any asset in respect of which a deduction is claimed and allowed shall be used only for the specified business for a period of 8 years beginning with the previous year in which such asset is acquired or constructed. Moreover, if such asset is used for any purpose other than the specified business, the total amount of deduction so claimed and allowed in any previous year in respect of such asset (as reduced by the amount of depreciation allowable in accordance with the provisions of section 32 as if no deduction had been allowed), shall be deemed to be income of the assessee chargeable under the head “Profits and gains of business or profession” of the previous year in which the asset is so used. However, this provision will not apply to a company which has become a sick industrial company under section 17(1) of the Sick Industrial Companies (Special Provisions) Act within the time period of 8 years as stated above.

 ♦ Where any deduction under section 35AD has been availed of by the assessee on account of capital expenditure incurred for the purposes of specified business in any assessment year, no deduction under section 10AA shall be available to the assessee in the same or any other assessment year in respect of such specified business.

5. With effect from assessment year 2015-16 a new Explanation 2 has been inserted in section 37(1) to clarify that expenditure incurred by the assessee on Corporate Social Responsibility activities in accordance with section 135 of the Companies Act, 2013 will not be considered as expenditure incurred by the assessee for the purposes of the business or profession.

Further, with effect from assessment year 2022-23, a new Explanation 3 has been inserted in section 37(1) to clarify that expenditure incurred to provide perquisite, in whatever form to any person, irrespective of whether the recipient is engaged in any business or profession, where the acceptance of such benefit or perquisite is a violation of any rule, law or regulation, which governs the recipient, shall be deemed to have not been incurred for business or profession and accordingly, the deduction for the same shall not be available. Furthermore, the expenditure, whether constituting an offence as per the prevailing laws in India or outside India, or prohibited by any law in force – whether in India or outside India, shall not be eligible for deduction under section 37(1) .

8. One residential house in India with effect from assessment year 2015-16. With effect from Assessment Year 2020-21, a taxpayer has an option to make investment in two residential house properties in India. This option can be exercised by the taxpayer only once in his lifetime provided the amount of long-term capital gain does not exceed Rs. 2 crores. With effect from Assessment Year 2023-24, the exemption shall be limited to Rs. 10 crores.

10. One residential house in India with effect from assessment year 2015-16. With effect from Assessment Year 2023-24, the aggregate of amount invested in new house property and deposited in capital gain account scheme shall be considered as eligible investment to the extent of Rs. 10 crores.

11.  See Bank Term Deposits Scheme, 2006.

12. with effect from assessment year 2015-16.

13. Where deduction is claimed under this section, deduction in relation to same amount cannot be claimed under section 80C.

14. section 80CCE provides that the aggregate amount of deductions under section 80C, section 80CCC and section 80CCD(1) shall not, in any case, exceed Rs. 1,50,000

With effect from assessment year 2015-16, amended sub-section (1) has clarified that a non-government employee can claim deduction under section 80CCD even if his date of joining is prior to January 1, 2004.

15. With effect from the assessment year 2012-13 section 80CCE is amended so as to provide that contribution made by the Central Government or any other employer to a pension scheme under sub-section (2) of section 80CCD shall not be included in the limit of deduction of Rs. 1,50,000 provided under section 80CCE.

With effect from assessment year 2016-17, sub-section (1A) of section 80CCD which laid down maximum deduction limit of Rs. 1,00,000 (under sub-section (1)) has been deleted.

Further, a new sub-section (1B) is inserted to provide for additional deduction to the extent of Rs. 50,000. The additional deduction is not subject to ceiling limit of Rs. 1,50,000 as provided under section 80CCE.

However, it is to be noted that additional deduction of Rs. 50,000 shall not be allowed in respect of contribution which is considered for deduction under section 80CCD(1), i.e., within limit of 10% of salary/gross total income

Any payment from NPS to an employee because of closure or his opting out of the pension scheme is chargeable to tax. However, with effect from the assessment year 2017-18, the whole amount received by the nominee from NPS on death of the assessee shall be exempt from tax.

17. The deduction under Section 80Dwill be available as per the limit specified below:

Individual	HUF
For self, spouse and dependent children : Rs. 25,000 (Rs. 50,000 if person insured is a senior citizen*);	Premium up to Rs. 25,000 (Rs. 50,000 if member insured is a senior citizen) paid to insure any member of the family.
For parents of the assessee : (Additional) Rs. 25,000 (Rs. 50,000 if person insured is a senior citizen)	NA
Medical expenditure if no amount is paid in respect of health insurance-Rs.50,000 (only in case of senior citizen)	Medical expenditure if no amount is paid in respect of health insurance-Rs.50,000 (only in case of senior citizen)
Aggregate amount of deduction cannot exceed Rs.1,00,000 in any case	Aggregate amount of deduction cannot exceed Rs.50,000 in any case.

*‘Senior citizen’ means an individual resident in India who is of the age of sixty years or more at any time during the relevant previous year.

18. Maximum deduction is Rs. 40,000 (Rs. 1,00,000 where expenditure is incurred for a senior citizen [w.e.f assessment year 2019-20])

With effect from assessment year 2016-17, the taxpayer shall be required to obtain a prescription from a specialist doctor (not necessarily from a doctor working in a Government hospital) for availing this deduction.

19. Scope of ‘higher education’ is enlarged with effect from assessment year 2010-11 to cover any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, Board or university recognised by the Central Government or State Government or local authority or by any other authority authorized by the Central Government or State Government or local authority to do so.

With effect from 1-4-2010 the scope of expression ‘relative’ has also been enlarged to cover the student for whom the taxpayer is the legal guardian.

20. Donation of any sums paid by the assessee, being a company, in the previous year as donations to the Indian Olympic Association or to any other association or institution established in India, as the Central Government may, having regard to the prescribed guidelines, by notification in the Official Gazette, specify in this behalf for—

 (i) the development of infrastructure for sports and games; or

(ii) the sponsorship of sports and games,

in India;

is eligible for the purpose of deduction under section 80G [this is in consequence of omission of section 10(23)].

21. Donation made to an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both is also eligible for the purpose of deduction under section 80G from the assessment year 2003-04 [this is in consequence of omission of section 10(20A)].

22. With effect from 1-4-2013 no deduction shall be allowed in respect of donation of any sum exceeding two thousand rupees unless such sum is paid by any mode other than cash.

23. With effect from 1-4-2013 no deduction shall be allowed under this section in respect of any sum exceeding ten thousand rupees unless such sum is paid by any mode other than cash.

24. With effect from 1-4-2014 deduction will not be allowed if sum is contributed in cash.

25. Time limits stated under section 80-IA(4)(iv) have been extended from 31-3-2014 to 31-3-2017.

26. 100% deduction shall be allowed from the AY beginning on or after the 1st day of April, 2021.

27. With effect from Assessment Year 2018-19:

i. ‘Eligible business’ means a business carried out by an eligible start up engaged in innovation, development or improvement of products or processes or services or a scalable business model with a high potential of employment generation or wealth creation.

ii. “Eligible start-up” means a company or a limited liability partnership engaged in eligible business which fulfils the following conditions, namely:

a. it is incorporated on or after the 1st day of April, 2016 but before the 1st day of April, 2025

b. the total turnover of its business does not exceed 100 crore rupees in the previous years in which deduction is claimed; and

c. it holds a certificate of eligible business from the Inter-Ministerial Board of Certification as notified in the Official Gazette by the Central Government

Tutorials

Maintenance of Books of Accounts

Introduction

Section 44AA of the Income-tax Act mandates the maintenance of books of account by certain persons engaged in specified professions and businesses. It provides for the preparation and maintenance of books of account by a person if his income or gross turnover or receipts, as the case may be, exceeds the prescribed threshold limit.

Who is required to maintain books of accounts?

An assessee is required to maintain books of accounts if their income or gross turnover/receipts during the specified period exceeds the prescribed threshold limit specified in the income tax laws. Section 44AA specified the threshold limit as per the nature of business or profession which is given below:

(a) Specified Professions

(b) Non-Specified Professions

(c) Business eligible for presumptive taxation scheme under Section 44AD, 44AE , 44BB , or 44BBB

(d) Other Business

Specified Professions

Specified professionals are required to maintain their books of accounts irrespective of their gross receipts and income except where a presumptive taxation scheme under Section 44ADA is opted.

Specified professionals include any person engaged in Legal, Medical, Engineering, Architectural, Technical Consultancy, Interior decoration, Film artist, Authorized Representative, Accountancy Profession, Company secretary, or Information Technology.

Non-Specified Professions

Non-specified professionals are required to maintain books of account if the income from their profession or gross receipts of such profession exceeds the threshold given below:

a) For individual or HUF: if the income from such profession exceeds Rs. 2,50,000 or Gross receipts exceeds Rs. 25 lakhs, in any of the 3 years immediately preceding the previous year.

b) For others: if the income from such profession exceeds Rs. 1,20,000 or Gross receipts exceed Rs. 10 lakhs, in any of the 3 years immediately preceding the previous year.

Business eligible for presumptive taxation scheme under Section 44AD, 44AE , 44BB , or 44BBB

A Business entity opting for presumptive tax scheme under section 44AD, 44AE , 44BB , or 44BBB is required to maintain books of account in accordance with following norms:

a) Businesses eligible for presumptive tax scheme under section 44AD

• • For resident individuals or HUFs – if the income of the assessee exceeds the maximum exemption limit and he has opted for the presumptive scheme in any of the last 5 previous years but does not opt for the same in the current year.
  • For resident partnership firm – The taxpayer has opted for the scheme in any of the last 5 previous years but does not opt for the same in the current year.

b) Businesses eligible for presumptive tax scheme under Section 44AE-if the taxpayer (engaged in plying, hiring, or leasing goods carriage) claims that the profits are lower than the deemed profits.

c) Businesses eligible for Presumptive Tax Scheme under Section 44BB-if the taxpayer (non-resident assessee engaged in the exploration of mineral oil) claims that the profits are lower than the deemed profits.

d) Businesses eligible for Presumptive Tax Scheme under Section 44BBB-if the taxpayer (a foreign company engaged in civil construction) claims that the profits are lower than the deemed profits.

Other Business

A Business entity is required to maintain books of account if income from business or gross turnover of such business exceeds the threshold given below:

a) For individual or HUF: if the income from such business exceeds Rs. 2,50,000 or Gross turnover exceeds Rs. 25 lakhs, in any of the 3 years immediately preceding the previous year.

b) For others: if the income from such business exceeds Rs. 1,20,000 or Gross turnover exceeds Rs. 10 lakhs, in any of the 3 years immediately preceding the previous year.

Note: Where a business or profession has been set up during the previous year, the threshold limit of income or gross turnover/receipts of the current year shall be considered.

Which books of accounts are required to be maintained?

Rule 2F of the Income-tax Rules prescribes the following books of accounts to be maintained under section 44AA :

For specified professions other than company secretary and information technology (where gross receipts exceed Rs. 1,50,000 in any of the 3 years immediately preceding the previous year) –

a) Cash book

b) Journal, if books of accounts are maintained according to the mercantile system of accounting

c) Ledgers

d) Carbon copies of bills and carbon copies or counterfoil of receipts issued by the assessee of value exceeding Rs. 25 (must be machine numbered or serially numbered)

e) Original bills issued to the assessee and receipts in respect of the expenditures incurred by him.

f) Signed vouchers, if bills and receipts are not issued and the amount of expenditure does not exceed Rs. 50 if the cash book does not contain adequate particulars in respect of these expenditures.

However, for medical professions, the following additional books are required to be maintained:

– Daily case register in Form 3C

– Inventory under broad heads of stock of drugs, medicines, and other consumable accessories used for the purpose of profession, as on the first and last day of the previous year.

2. For specified professions (in every other case), and non-specified professions & businesses where gross receipts exceed Rs. 1,50,000 in any of the 3 years immediately preceding the previous year –

Such books of account which may enable the Assessing Officer to compute the taxable income.

Other Provisions

Where books of account and other documents should be kept and maintained?

Books of account and other documents should be kept and maintained by the person at the place where he is carrying on the profession or, where the profession is carried on at more than one place, at the principal place of his profession.

However, where the person keeps and maintains separate books of account in respect of each place where the profession is carried on, such books of account and other documents may be kept and maintained at the respective places at which the profession is carried on.

Period of maintenance

Books of account and documents should be kept and maintained for a period of 6 years from the end of the relevant assessment year.

However, if the assessment in relation to any assessment year has been reopened under Section 147 within the prescribed period, all the books of account and other documents which were kept and maintained at the time of reopening of the assessment should be kept and maintained until the assessment so reopened has been completed.

Penalty for non-compliance

If an assessee fails to maintain or retain books of account and other documents for the specified period in accordance with this provision, a penalty may be imposed under Section 271A of Rs. 25,000.

MCQs on Maintenance of Books of Accounts

Q1. Section 44AA specified the threshold limit for maintenance of books of accounts for which of the following taxpayers?

(a) Specified Professions

(b) Non-Specified Professions

(c) Business

(d) All of the above

Correct answer: (d)

Justification of correct answer: Section 44AA specified the threshold limit as per the nature of business or profession which is given below:

1. Specified Professions

2. Non-Specified Professions

3. Business eligible for presumptive taxation scheme under Section 44AD, 44AE, 44BB, or 44BBB

4. Other Business

Q2. Which of the following persons are required to maintain books of accounts irrespective of the gross receipts and income except where a presumptive taxation scheme under Section 44ADA is opted?

(a) Specified Professions

(b) Non-Specified Professions

(c) Business eligible for presumptive taxation scheme under Section 44AD, 44AE , 44BB , or 44BBB

(d) All of the above

Correct answer: (a)

Justification of correct answer: Specified professionals are required to maintain their books of accounts irrespective of their gross receipts and income except where a presumptive taxation scheme under Section 44ADA is opted.

Specified professionals include any person engaged in Legal, Medical, Engineering, Architectural, Technical Consultancy, Interior decoration, Film artist, Authorized Representative, Accountancy Profession, Company secretary, or Information Technology.

Q3. Non-specified professionals (Individuals) are required to maintain books of account if the income from their profession or gross receipts of such profession exceeds ________.

(a) Income exceeds Rs. 2,50,000 or Gross receipts exceeds Rs. 25 lakhs, in any of the 3 years immediately preceding the previous year

(b) Income exceeds Rs. 1,20,000 or Gross receipts exceed Rs. 10 lakhs, in any of the 3 years immediately preceding the previous year

(c) either (a) or (b)

(d) None of the above

Correct answer: (a)

Justification of correct answer: Non-specified professionals are required to maintain books of account if the income from their profession or gross receipts of such profession exceeds the threshold given below:

(a) For individual or HUF: if the income from such profession exceeds Rs. 2,50,000 or Gross receipts exceeds Rs. 25 lakhs, in any of the 3 years immediately preceding the previous year.

(b) For others: if the income from such profession exceeds Rs. 1,20,000 or Gross receipts exceed Rs. 10 lakhs, in any of the 3 years immediately preceding the previous year.

Q4. Resident Individual eligible for presumptive tax scheme under section 44AD is required to maintain books of account if the income of the assessee exceeds the maximum exemption limit and he has opted for the presumptive scheme in any of the last 5 previous years but does not opt for the same in the current year.

(a) True

(b) False

Correct answer: (a)

Justification of correct answer: Resident Individual or HUFs eligible for presumptive tax scheme under section 44AD is required to maintain books of account if the income of the assessee exceeds the maximum exemption limit and he has opted for the presumptive scheme in any of the last 5 previous years but does not opt for the same in the current year.

Q5. Resident Individual eligible for presumptive tax scheme under Section 44AE is required to maintain books of account if the income of the assessee exceeds the maximum exemption limit and he has opted for the presumptive scheme in any of the last 5 previous years but does not opt for the same in the current year.

(a) True

(b) False

Correct answer: (b)

Justification of correct answer: Businesses eligible for presumptive tax scheme under Section 44AE are required to maintain books of accounts if the taxpayer (engaged in plying, hiring, or leasing goods carriage) claims that the profits are lower than the deemed profits.

Q6: ABC Ltd. engaged in the business of manufacturing paper is required to maintain books of accounts if _________.

(a) Income from business exceeds Rs. 2,50,000 or Gross turnover exceeds Rs. 25 lakhs, in any of the 3 years immediately preceding the previous year.

(b) Income from such business exceeds Rs. 1,20,000 or Gross turnover exceeds Rs. 10 lakhs, in any of the 3 years immediately preceding the previous year.

(c) Either (a) or (b)

(d) None of the above

Correct answer: (b)

Justification of correct answer: A Business entity is required to maintain books of account if the income from such business exceeds Rs. 1,20,000 or Gross turnover exceeds Rs. 10 lakhs, in any of the 3 years immediately preceding the previous year.

Comment on the incorrect answer: An individual or HUF is required to maintain books of account if the income from such business exceeds Rs. 2,50,000 or Gross turnover exceeds Rs. 25 lakhs, in any of the 3 years immediately preceding the previous year.

Q7. Books of account and documents should be kept and maintained for a period of _________ from the end of the relevant assessment year.

(a) 6 years

(b) 7 years

(c) 5 years

(d) No Limit

Correct answer: (a)

Justification of correct answer: Books of account and documents should be kept and maintained for a period of 6 years from the end of the relevant assessment year.

Q8. What is the penalty if an assessee fails to maintain or retain books of account and other documents for the specified period in accordance with this provision?

(a) 10,000

(b) 25,000

(c) 1,00,000

(d) No Penalty

Correct answer: (b)

Justification of correct answer: If an assessee fails to maintain or retain books of account and other documents for the specified period in accordance with this provision, a penalty may be imposed under Section 271A of Rs. 25,000.

Prohibited transaction in cash/limit on cash transactions​

Income-tax Act has several provisions that restrict receipt or payment made in cash by a person subject to a certain threshold limit. These restrictions have been introduced to move towards a cashless economy and to reduce the generation and circulation of black money.

Disallowance of cash payments [Section 40A(3)]

Section 40A(3) provides that if the payment or aggregate of payments for an expenditure to a person in a day exceeds Rs. 10,000 and it is made by any mode other than account payee cheque or bank draft or electronic clearing system through a bank account or prescribed electronic modes, no deduction shall be allowed for such expenditure.

However, where payment is made for plying, hiring, or leasing goods carriages, the ceiling of Rs. 35,000 shall be considered instead of Rs. 10,000.

The provision of Section 40A(3) does not apply to payments made by commission agents for goods received by them for sale on a commission or consignment basis because such payment is not an expenditure deductible in computing the taxable income of the commission agent.

However, if the commission agent purchases goods on his own account and not on a commission basis, the requirement of payment in a specified mode applies to such purchases.

Further, where the taxpayer had claimed a deduction in respect of expenditure in any of the earlier years and subsequently makes payment thereof, otherwise than by an account payee cheque or bank draft, in excess of Rs. 10,000, in that situation, the payment so made is deemed to be the business income of the previous year in which payment is made.

Exceptions:

The disallowance does not apply if payment is made in certain circumstances as prescribed in Rule 6DD. These circumstances are prescribed below:

A. Payment to Specified Institutions –

No disallowance shall be made for the payment made in a non-specified mode (i.e., cash, crossed cheque, bearer cheque, etc.) to the following institutions:

(a) RBI or any banking company, (b) State Bank of India or any of its subsidiary banks, (c) Co-op. banks or land mortgage bank, (d) Primary Agricultural Credit Society or Primary Credit Society, (e) LIC

B. Payment in Legal Tender to the Government

No disallowance shall be made for an expenditure whose payment is required to be made to the Government in legal tender, such as payment of freight charges/booking of wagons to railways, sales tax, excise duty, etc.

C. Payment by Specified Modes

No disallowance shall be made where the payment is made by the following modes:

(a) Letter of credit arrangements through a bank, (b) Mail or telegraphic transfer through a bank, (c) Book adjustment from one bank account to another bank account, (d) Bill of exchange payable only to a bank.

Here bank includes a bank established outside India also.

D. Payment by Book Adjustment

No disallowance shall be made for the payment made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to him.

E. Payment for Agriculture or Animal Produce

No disallowance shall be made for payment made to the cultivator, grower, or producer in respect of the following purchases:

(a) Agriculture or forest produce, (b) Produce of animal husbandry (including, livestock, meat, hides, and skins) or dairy or poultry farming, (c) Fish or fish products, (d) Products of horticulture or apiculture (bee-keeping for sale of honey)

The immunity from disallowance under this provision shall be available to the payer if payment for animal husbandry is made to a person who is the producer of these goods. If these goods are purchased from a trader, broker, or any other middleman, this exception shall not available

F. Payment for Produce of Cottage Industry

No disallowance shall be made where the payment is made to a producer for the purchase of the products manufactured or processed without the aid of power in a cottage industry.

G. Payment in Remote Places

No disallowance shall be made for the cash payment if payment is made in a village or town, to any person who ordinarily resides or carries any business, profession, or vocation, in such village or town which, on the date of such payment, is not served by the bank.

H. Terminal payments to low-paid employees

No disallowance shall be made for any payment made by the employer by way of gratuity, retrenchment compensation, or similar terminal benefits to an employee (or to his heirs) on or in connection with the retirement, retrenchment, resignation, discharge, or death of such employee. Such immunity is allowed if the aggregate of such sum payable to the employee or his heir does not exceed Rs. 50,000.

I. Payment of salary at remote places

If an employee is temporarily posted for 15 days or more in a place other than his normal place of duty or on a ship and he does not maintain any bank account at such place or ship, the salary paid after deducting tax at source under section 192 by the employer to such employee shall not be disallowed.

J. Payment to the agent

Payments made in a non-specified mode shall not be disallowed if it is paid by any person to his agent who is required to make payment in cash for goods or services on his behalf.

K. Payment made by an authorized dealer

Authorized dealers and money changers are normally required to pay cash for purchases of foreign currency or ter’s cheques in the normal course of their business, and no disallowance shall be made for any cash payments made by them.

Authorized dealer or money changer means a person authorised as such to deal in foreign currency or foreign exchange under any law for the time being in force.

L. Purchase of Animal

Any person who buys animals from farmers to slaughter them and to sell their raw meat or carcasses, to meat processing factories, traders, or retail outlets, may be considered a producer of livestock and meat. This exemption shall be available to the payer subject to the fulfilment of following conditions:

a) The person receiving the payment files a declaration that he is a producer of meat;

b) The producer of meat declares that the payment, otherwise than through account payee cheque or bank draft, was made on his insistence; and

c) A veterinary doctor certifies that the person specified in the certificate is a producer of meat and that slaughtering was done under his supervision.

Acceptance of loans, deposits, and specified sum [Section 269SS]

Section 269SS restricts a person (recipient) from taking or accepting any loan or deposit or any specified sum from any other person (depositor), otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or other prescribed electronic mode (impermissible mode). However, restriction isn’t imposed if the recipient and depositor, both are having agriculture income and neither of them has any income chargeable to tax.

The following transactions are covered under section 269SS:

• Any loan or deposit of money; or
• Any sum of money receivable by way of advance or otherwise in relation to the transfer of immovable property, whether or not the transfer takes place.

The provision shall be attracted if:-

a) The amount (or aggregate) of such loan or deposit or specified sum from a depositor is Rs. 20,000 or more; or

b) On the date of taking or accepting such loan or deposit or specified sum, the amount (or the aggregate) of any loan or deposit or specified sum taken or accepted earlier from the depositor remaining unpaid is Rs. 20,000 or more; or

c) The aggregate of the sum referred to in points (a) and (b) above is Rs. 20,000 or more.

However, if a deposit is accepted by a Primary Agricultural Credit Society (PACS) or a Primary Co-Operative Agricultural and Rural Development Bank (PCARD) from its member or a loan is taken from a PACS or a PCARD by its member, the threshold of Rs. 20,000 shall be enhanced to Rs. 2 lakhs¹.

Exceptions – There is no restriction to take or accept any loan or deposit or specified sum from or by any of the following:

• Government;
• Any banking company, post office saving bank, or co-operative bank;
• Any corporation established by a Central, State, or Provincial Act;
• Any government company defined under section 2(45) of the Companies Act, 2013; or
• Any other notified institutions, associations, or body, or class of institutions, associations, or bodies.

Penalty for contravention of the provisions – Where a person takes or accepts any loan or deposit (or specified sum) in cash or in a mode which is in contravention of Section 269SS, he shall be liable for a penalty under Section 271D of a sum equal to the amount of the loan or deposit (or specified sum) so taken or accepted.

Mode of undertaking transactions [Section 269ST]

Section 269ST restricts a person (recipient) from receiving an amount of Rs. 2 lakhs or more otherwise than by an account payee cheque or account payee bank draft or use of an electronic clearing system through a bank account or other prescribed electronic modes.

This provision imposes restrictions in respect of the receipts of Rs. 2 lakhs or more:

a) In aggregate from a person in a day; or

b) In respect of a single transaction; or

For Example, Mr. A has sold goods worth Rs. 2.5 lakhs to Mr. B who has paid in cash as follows:

• Rs. 1.5 lakhs on April 1;
• Rs. 25,000 on May 1; and
• Rs. 75,000 on June 1.

Mr. A would be considered to have not complied with the provisions of Section 269ST the moment he receives the last payment of Rs. 75,000 which eventually makes the total receipt in respect of a transaction exceeding Rs. 200,000.

c) In respect of a transaction relating to one event or occasion from a person – if there are multiple transactions, relating to one event or occasion from a person they would be covered under the restriction.

Where a transaction is covered within the scope of Section 269SS (accepting loan or deposit in impermissible mode) provisions of this section shall not apply.

Exceptions – This provision shall not apply to the receipt by the following persons:

• Government;
• Any banking company, post office saving bank, or co-operative bank; or
• Any other notified persons, class of persons, or receipts.

Further, the provision of this section shall not apply to receipt by any person from any banking company, post office savings bank, or co-operative bank.

Penalty for contravention of the provisions – Where a person receives the amount in contravention of this provision, he shall be liable for a penalty under Section 271DA of a sum equal to the amount of such receipts.

Acceptance of payment through prescribed electronic modes [Section 269SU]

Section 269SU provides that where a person is carrying on a business and his total sales, turnover, or gross receipts during the immediately preceding previous year exceeds Rs. 50 crores, it shall be mandatory for him to provide a facility to accept the payment through the following electronic modes:

a) Debit card powered by RuPay;

b) Unified Payments Interface (UPI) (BHIM-UPI); and

c) Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code).

These facilities to accept the payment shall be in addition to the facility for other electronic modes of payment being provided by such person.

The provision of this section shall not apply to a person having only B2B transactions (i.e., no transaction with retail customer/consumer) subject to the condition that at least 95% of the aggregate of all amounts received during the previous year, including the amount received for sales, turnover or gross receipts, is by any mode other than cash.

Penalty for contravention of the provisions – Where a person fails to provide the facility for accepting payment through prescribed electronic modes as required under this provision, he shall be liable for a penalty under Section 271DB of Rs. 5,000 for every day during which such failure continues.

Mode of repayment of certain loans or deposits [Section 269T]

Section 269T restricts a person from repayment of any loan, deposit, or any specified advance received by it otherwise than by an account payee cheque or account payee bank draft (drawn in the name of the person who made the loan, deposit or specified advance) or by use of electronic clearing system through a bank account or other prescribed electronic modes.

Repayment in respect of the following transactions are covered under this provision:

• Any loan or deposit of money which is repayable after notice or repayable after a period and in case of a person other than company it includes loan or deposit of any nature; or
• Any sum of money in the nature of advance in relation to the transfer of immovable property, whether or not the transfer takes place.

Such loan, deposit, or specified sum should be taken or accepted in accordance with provisions of Section 269ST. In case of cash repayment of loan or deposit, the borrower could be penalized under Section 269T and the recipient could be penalized under Section 269ST.

This provision shall be attracted if the value of the covered transaction exceeds the following limit:

a) The amount of such loan or deposit or specified advance together with the interest payable thereon is Rs. 20,000 or more;

b) The aggregate amount of the loans or deposits held either in own name or jointly with any other person on the date of such repayment together with the interest payable on such loans or deposits is Rs. 20,000 or more; or

c) The aggregate amount of the specified advances received by such person either in his own name or jointly with any other person on the date of such repayment together with the interest payable on such specified advances is Rs. 20,000 or more.

However, if a deposit is paid by a Primary Agricultural Credit Society (PACS) or a Primary Co-Operative Agricultural and Rural Development Bank (PCARD) to its member or a loan is repaid to a PACS or a PCARD by its member, the threshold of Rs. 20,000 shall be enhanced to Rs. 2 lakhs².

Exceptions– There is no restriction on repayment of any loan or deposit or specified advance taken or accepted from any of the following:

• Government;
• Any banking company, post office saving bank, or co-operative bank;
• Any corporation established by a Central, State, or Provincial Act;
• Any government company defined under section 2(45) of the Companies Act, 2013; or
• Any other notified institutions, associations, or body, or class of institutions, associations, or bodies.

Penalty for contravention of the provisions – Where a person repays any loan or deposit (including interest) or specified advance in cash or an impermissible mode in contravention of provisions of Section 269T, he shall be liable for a penalty under 271E of a sum equal to loan or deposit or specified advance so repaid.

Overview of Section 269SS, 269ST , 269SU and 269T :

Section	Covered Transaction	Threshold Limit	Consequences of Default
269SS	Taking or accepting any loan or deposit or specified sum	Rs. 20,000 or more	Penalty under Section 271D (100% of loan or deposit so taken or accepted)
269ST	Receipt of any amount	Rs. 2 lakhs or more	Penalty under Section 271DA (100% of the amount so received)
269SU	Facility to be provided for accepting payment through prescribed electronic modes	Total sales/turnover/gross receipts exceed Rs. 50 crore during the immediately preceding previous year	Penalty under Section 271DB (Rs. 5,000 per day during which the default continues).
269T	Repayment of any loan or deposit or specified advance	Rs. 20,000 or more	Penalty under Section 271E (100% of loan or deposit so repaid)

Here for the above sections including section 40A(3) prescribed electronic modes include-

(a) Credit Card; (b) Debit Card; (c) Net Banking; (d) IMPS (Immediate Payment Service); (e) UPI (Unified Payment Interface); (f) RTGS (Real Time Gross Settlement); (g) NEFT (National Electronic Funds Transfer), and (h) BHIM (Bharat Interface for Money) Aadhaar Pay.

MCQs on the prohibited transaction in cash/limit on cash transactions

Q1. Deduction for expenditure is not allowed under section 40A(3), where the cash payment is made to a person in a day exceeds Rs. ________.

(a) 10,000

(b) 15,000

(c) 20,000

(d) No limit

Correct answer: (a)

Justification for correct answer: If the payment (or aggregate of payments) for an expenditure to a person in a day exceeds Rs. 10,000 and it is made by any mode other than account payee cheque or bank draft or electronic clearing system through a bank account or prescribed electronic modes, no deduction shall be allowed for such expenditure under section 40A(3).

Q2. What is the ceiling limit under section 40A(3) where payment is made for plying, hiring, or leasing goods carriages?

(a) 10,000

(b) 15,000

(c) 20,000

(d) 35,000

Correct Answer: (d)

Justification for correct answer: Where payment is made for plying, hiring, or leasing goods carriages, the ceiling of Rs. 35,000 shall be considered instead of Rs. 10,000.

Q3. Section 40A(3) shall not be applied where payment is made to ________.

(a) RBI

(b) SBI

(c) LIC

(d) All of the above

Correct Answer: (d)

Justification for correct answer: No disallowance shall be made under section 40A(3) for the payment made in a non-specified mode (i.e., cash, crossed cheque, bearer cheque, etc.) to (a) RBI or any banking company, (b) State Bank of India or any of its subsidiary banks, (c) Co-op. banks or land mortgage bank, (d) Primary Agricultural Credit Society or Primary Credit Society, (e) LIC

Q4. Which transactions are covered in the ambit of section 269SS ?

(a) Any loan or deposit of money

(b) Any sum of money receivable by way of advance to the transfer of immovable property

(c) Both (a) and (b)

(d) None of the above

Correct Answer: (c)

Justification for correct answer: The following transactions are covered under the provision of section 269SS – (a) Any loan or deposit of money; or (b) Any sum of money receivable by way of advance or otherwise in relation to the transfer of immovable property, whether or not the transfer takes place.

Q5. What is the penalty for contravention of the provision of Section 269SS?

(a) Rs. 5,000 per day

(b) a sum equal to the amount of the loan or deposit (or specified sum) so taken or accepted

(c) Rs. 1,00,000

(d) None of the above

Correct Answer: (b)

Justification for correct answer: Where a person takes or accepts any loan or deposit (or specified sum) in cash or in a mode which is in contravention of Section 269SS, he shall be liable for a penalty under Section 271D of a sum equal to the amount of the loan or deposit (or specified sum) so taken or accepted.

Q6. Provision of section 269SS is not applied where loan or deposit is taken or accepted from ________.

(a) Government

(b) Any banking company

(c) Co-operative bank

(d) All of the above

Correct Answer: (d)

Justification for correct answer: There is no restriction under section 269SS to take or accept any loan or deposit or specified sum from or by – (a) Government; (b) Any banking company, post office saving bank, or co-operative bank; (c) Any corporation established by a Central, State, or Provincial Act; (d) Any government company defined under section 2(45) of the Companies Act, 2013; or (e) Any other notified institutions, associations, or body, or class of institutions, associations, or bodies.

Q7. Provision of section 269ST imposes restrictions in respect of the receipts of Rs. 2 lakhs or more ________.

(a) In aggregate from a person in a day

(b) In respect of a single transaction

(c) In respect of a transaction relating to one event or occasion from a person

(d) All of the above

Correct Answer: (d)

Justification for correct answer: Provision of section 269ST imposes restrictions in respect of the receipts of Rs. 2 lakhs or more:

• In aggregate from a person in a day; or
• In respect of a single transaction; or
• In respect of a transaction relating to one event or occasion from a person.

Q8. What is the penalty for contravention of the provision of Section 269ST?

(a) Rs. 5,000 per day

(b) a sum equal to the amount of such receipts

(c) Rs. 1,00,000

(d) None of the above

Correct Answer: (b)

Justification for correct answer: Where a person receives the amount in contravention of provision of section 269ST, he shall be liable for a penalty under Section 271DA of a sum equal to the amount of such receipts.

Q9. Which of the following facility to accept the payment is mandatorily required under Section 269SU?

(a) Debit card powered by RuPay

(b) BHIM-UPI

(c) BHIM-UPI-QR Code

(d) All of the above

Correct Answer: (d)

Justification for correct answer: Section 269SU provides that where a person is carrying on a business and his total sales, turnover, or gross receipts during the immediately preceding previous year exceeds Rs. 50 crores, it shall be mandatory for him to provide a facility to accept the payment through the following electronic modes:

• Debit card powered by RuPay;
• Unified Payments Interface (UPI) (BHIM-UPI); and
• Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code).

Q10. What is the penalty for contravention of the provision of Section 269SU?

(a) Rs. 5,000 per day

(b) Rs. 50,000

(c) Rs. 1,00,000

(d) None of the above

Correct Answer: (a)

Justification for correct answer: Where a person fails to provide the facility for accepting payment through prescribed electronic modes as required under this section 269SU, he shall be liable for a penalty under Section 271DB of Rs. 5,000 for every day during which such failure continues.

Q11. What is the penalty for contravention of the provision of Section 269T?

(a) Rs. 5,000 per day

(b) a sum equal to loan or deposit so repaid

(c) Rs. 1,00,000

(d) None of the above

Correct Answer: (b)

Justification for correct answer: Where a person repays any loan or deposit (including interest) or specified advance in cash or an impermissible mode in contravention of provisions of Section 269T, he shall be liable for a penalty under 271E of a sum equal to loan or deposit or specified advance so repaid.

Q12. Which of the following is covered under the prescribed electronic modes for Section 40A(3)?

(a) UPI

(b) IMPS

(c) Net-banking

(d) All of the above

Correct Answer: (d)

Justification for correct answer: prescribed electronic modes include – (a) Credit Card; (b) Debit Card; (c) Net Banking; (d) IMPS (Immediate Payment Service); (e) UPI (Unified Payment Interface); (f) RTGS (Real Time Gross Settlement); (g) NEFT (National Electronic Funds Transfer), and (h) BHIM (Bharat Interface for Money) Aadhaar Pay.

Notes:

¹ Inserted by the Finance Act, 2023 with effect from 01.04.2023.

² Inserted by the Finance Act, 2023 with effect from 01.04.2023.

Deductions allowable to tax payer

DEDUCTIONS^*

[AY 2026-27]

Section	Nature of deduction	Who can claim
(1)	(2)	(3)
	Against ‘salaries’
16(ia)	Standard Deduction (a) In case of normal tax regime – Rs. 50,000 or the amount of salary, whichever is lower; (b) In case of new tax regime under section 115BAC(1A)(ii) – Up to Rs. 75,000 or the amount of salary, whichever is lower	Individual – Salaried Employee & Pensioners
16(ii)	Entertainment allowance [actual or at the rate of 1/5th of salary, whichever is less] [limited to Rs. 5,000]	Government employees
16(iii)	Employment tax	Salaried assessees
	Against ‘income from house properties’
23(1), first proviso	Taxes levied by local authority and borne by owner if paid in relevant previous year	All assessees
24(a)	Standard deduction [30% of the annual value (gross annual value less municipal taxes)]	All assessees
24(b)	Interest on borrowed capital (Rs. 30,000/Rs. 2,00,000, subject to specified conditions)	All assessees
25A(2)	Standard deduction of 30 per cent of arrears of rent or unrealised rent received	All assessees
	Against ‘profits and gains of business or profession’ A. Deductible items
30	Rent, rates, taxes, repairs (excluding capital expenditure) and insurance for premises	All assessees
31	Repairs (excluding capital expenditure) and insurance of machinery, plant and furniture	All assessees
32(1)(i)	Depreciation1 in respect of following assets shall be allowed at prescribed percentage on actual cost of an asset (i.e., Straight Line Method): i. Tangible Assets (buildings, machinery, plant or furniture); ii. Intangible Assets (know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature not being goodwill of business or profession). However, if asset is acquired and put to use for less than 180 days during the previous year, the deduction shall be restricted to 50% of depreciation computed above. Note: Taxpayers engaged in business of generation or generation and distribution of power have the option to claim depreciation on written down value basis also	Taxpayer engaged in business of generation or generation and distribution of power.
32(1)(ii)	Depreciation1 in respect of following assets shall be allowed at prescribed percentage on written down value of each block of asset (as per WDV method): i. Tangible Assets (buildings, machinery, plant or furniture); ii. Intangible Assets (know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature not being goodwill of business or profession). However, if asset is acquired and put to use for less than 180 days during the previous year, the deduction shall be restricted to 50% of depreciation computed above.	All assessees engaged in business or profession
32(1)(iia)	Additional depreciation shall be allowed at 20% of actual cost of new plant and machinery [other than ships, aircraft, office appliances, second hand plant or machinery, etc.] (Subject to certain conditions). However, if an asset is acquired and put to use for less than 180 days during the previous year, 50% of additional depreciation shall be allowed in year of acquisition and balance 50% would be allowed in the next year.	All taxpayers engaged in: a) manufacture or production of any article or thing; or b) generation, transmission or distribution of power (if taxpayer is not claiming depreciation on straight line basis ).
33AB	Tea/Coffee/Rubber Development Account – Amount deposited in account with National Bank (Special Account) or in Deposit Account of Tea Board, Coffee Board or Rubber Board in accordance with approved scheme or 40% of profits of business, whichever is less (subject to certain conditions)	Assessees engaged in business of growing and manufacturing Tea/Coffee/Rubber in India
33ABA	Amount deposited in Special Account with SBI/Site Restoration Account or 20 per cent of profits, whichever is less (subject to certain conditions)	Assessee carrying on business of prospecting for, or extraction or production of, petroleum or natural gas or both in India
35(1)(i)	Revenue expenditure on scientific research pertaining to business of assessee is allowed as deduction (Subject to certain conditions). Note: Expenditure on scientific research incurred within 3 years before commencement of business (in the nature of purchase of materials and salary of employees other than perquisite) is allowed as deduction in the year of commencement of business to the extent certified by prescribed authority.	All assessee
35(1)(ii)26	100% of contribution made to approved research association, university, college or other institution to be used for scientific research shall be allowed as deduction (Subject to certain conditions)	All assessee
35(1)(iia)	100% of contribution made to an approved company registered in India to be used for the purpose of scientific research is allowed as deduction (Subject to certain conditions)	All assessee
35(1)(iii)	100% of contribution made to approved research association, university, college or other institution with objects of undertaking statistical research or research in social sciences shall be allowed as deduction (Subject to certain conditions)	All assessee
35(1)(iv) read with 35(2)	Capital expenditure incurred during the year on scientific research relating to the business carried on by the assessee is allowed as deduction (Subject to certain conditions) Capital expenditure incurred within 3 years before commencement of business is allowed as deduction in the year of commencement of business. Note: i. Capital expenditure excludes acquisition of land and acquisition of any interest in land; ii. No depreciation shall be allowed on the assets acquired with the capital expenditure deductible under this provision..	All assessee
35(2AA)26	100% of payment made to a National Laboratory or University or an Indian Institute of Technology or a specified person is allowed as deduction (Subject to certain conditions). The payment should be made with the specified direction that the sum shall be used in scientific research undertaken under an approved programme.	All assessee
35(2AB)26	100% of any expenditure incurred by a company on scientific research (including capital expenditure other than on land and building) on in-house scientific research and development facilities as approved by the prescribed authorities shall be allowed as deduction (Subject to certain conditions). Note: Company should enter into an agreement with the prescribed authority for co-operation in such research and development and fulfils such conditions with regard to maintenance of accounts and audit thereof and furnishing of reports in such manner as may be prescribed;	Company engaged in business of bio-technology or in any business of manufacturing or production of eligible articles or things
35ABA	Capital expenditure incurred and actually paid for acquiring any right to use spectrum for telecommunication services shall be allowed as deduction over the useful life of the spectrum in equal instalments	All Assessee engaged in telecommunication services
35ABB	Expenditure incurred for obtaining licence to operate telecommunication services either before commencement of such business or thereafter at any time during any previous year	All assessees
35AD	Capital expenditure incurred, wholly and exclusively, for the purpose of any specified business [setting up and operating a cold chain facility; setting up and operating a warehousing facility for storage of agricultural produce; laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network; building and operating, anywhere in India, a hotel of two-star or above category as classified by the Central Government; building and operating, anywhere in India, a hospital with at least one hundred beds for patients; developing and building a notified housing project under a scheme for slum redevelopment or rehabilitation framed by the Government, as the case may be, in accordance with prescribed guidelines; developing and building a notified housing project under a scheme for affordable housing framed by the Government, as the case may be, in accordance with prescribed guidelines; production of fertilizer in India; setting up and operating an inland container depot or a container freight station which is approved/notified under the Customs Act, 1962; bee-keeping and production of honey and beeswax; and setting up and operating a warehousing facility for storage of sugar. Lying and operating a slurry pipeline for the transportation of iron ore; setting-up and operating a notified semi-conductor wafer fabrication manufacturing unit; developing or maintaining and operating or developing, maintaining and operating a new infrastructure facility4, carried on by the assessee during the previous year in which such expenditure is incurred (subject to certain conditions) Note: No deduction of any capital expenditure above Rs 10,000 shall be allowed where such expenditure is incurred otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed.	All assessees Note: Such deduction is available to Indian company in case of following business, namely;- i) Business of laying and operating a cross-country natural gas or crude or petroleum oil pipeline network. ii) Developing or maintaining and operating or developing, maintaining and operating a new infrastructure facility.
35CCA	Payment to associations/institutions for carrying out rural development programmes (subject to certain conditions)	All assessees
35CCC	100% of expenditure on notified agricultural extension project (subject to certain conditions)	All assessees
35CCD	100% of expenditure on notified skill development project (subject to certain conditions)	A company
35D	Amortisation of certain preliminary expenses [deductible in 5 equal annual instalments] (subject to certain conditions)	Indian companies and resident non-corporate assessees
35DD	Amortisation of expenditure incurred after 31-3-1999 in case of amalgamation or demerger in the hands of an Indian company (one-fifth of such expenditure for 5 successive previous years) (subject to certain conditions)	Indian Company
35DDA	Amortisation of expenditure incurred under voluntary retirement scheme in 5 equal annual instalments starting with the year when the expenditure is incurred	All assessees
35E	Expenditure on prospecting, etc., for certain minerals [deductible in ten equal annual instalments] (subject to certain conditions)	Indian companies and resident non-corporate assessees engaged in prospecting, etc., for minerals
36(1)(i)	Insurance premium covering risk of damage or destruction of stocks/stores	All assessees
36(1)(ia)	Insurance premium covering life of cattle owned by a member of co-operative society engaged in supplying milk to federal milk co-operative society	Federal milk co-operative societies
36(1)(ib)	Medical insurance premium paid by any mode other than cash, to insure employee’s health under (a) scheme framed by GIC of India and approved by Central Government; or (b) scheme framed by any other insurer and approved by IRDA	All assessees as employers
36(1)(ii)	Bonus or commission paid to employees	All assessees
36(1)(iii)	Interest on borrowed capital2	All assessees
36(1)(iiia)	Pro rata amount of discount on a zero coupon bond based on tenure of such bond and calculated in prescribed manner	All assessees
36(1)(iv)	Contributions to recognised provident fund and approved superannuation fund [subject to certain limits and conditions]	All assessees as employers
36(1)(iva)	Any sum paid by assessee-employer by way of contribution towards a pension scheme, as referred to in section 80CCD, on account of an employee to the extent it does not exceed 14 per cent of the employee’s salary in the previous year.	All assessees as employers
36(1)(v)	Contributions to approved gratuity fund [subject to certain limits and conditions]	All assessees as employers
36(1)(va)	Contributions to any provident fund or superannuation fund or any fund set up under Employees’ State Insurance Act, 1948 or any other fund for welfare of such employees, received from employees if the same are credited to the employee’s account in relevant fund or funds before due date	All assessees as employers
36(1)(vi)	Allowance in respect of animals which have died or become permanently useless [subject to certain conditions]	All assessees
36(1)(vii)3	Bad debts which have been written off as irrecoverable [subject to limitation in the case of banks and financial institutions]	All assessees
36(1)(viia)	Provision for bad and doubtful debts
	■ up to 8.5 per cent of total income before making any deduction under this clause and Chapter VI-A, and up to 10 per cent of aggregate average advances made by its rural branches	Certain scheduled banks, non-scheduled banks (but other than foreign banks) and co-operative bank (other than primary agricultural credit society or primary co-operative agricultural and rural development bank)
	■ up to 5 per cent (10% in case of Public Financial Institutions, State Financial Corporations and State Industrial Investment Corporations in any of the two consecutive assessment years 2003-04 and 2004-05 – subject to certain conditions) of total income before making any deduction under this clause and Chapter VI-A	Foreign banks/Public financial institutions/State financial corporations/State industrial investment corporations. Non-Banking Financial Company
36(1)(viii)	Amounts transferred to special reserve [subject to certain conditions and maxi-mum of 20 per cent of profits derived from eligible business]	Specified entities, namely, financial corporations/financial corporation which is a public sector company/banking company/co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank/housing finance company/any other financial corporation including a public company
36(1)(ix)	Expenditure for promoting family planning amongst employees (deductible in 5 equal annual instalments in case of capital expenditure)	Companies
36(1)(xii)	Any expenditure (not being in the nature of capital expenditure) incurred by a notified corporation or body corporate, by whatever name called, constituted or established by a Central, State or Provincial Act, for the objects and purposes authorised by the Act under which such corporation or body corporate was constituted or established	Notified corporation or body corporate, by whatever name called, constituted or established by a Central, State or Provincial Act
36(1)(xiv)	Contribution to notified credit guarantee trust fund for small industries	Public financial institution
36(1)(xv)	Securities Transaction Tax paid if corresponding income is included as income under the head ‘Profits and gains of business or profession’	All assessees
36(1)(xvi)	Amount equal to commodities transaction tax paid by an assessee in respect of taxable commodities transactions entered into in the course of his business during the previous year, if the income arising from such transactions is included in the income computed under the head “Profits and gains of business or profession”	All assessees
36(1)(xvii)	Amount of expenditure incurred by a co-operative society for purchase of sugarcane shall be allowed as deduction to the extent of lower of following: a) Actual purchase price of sugarcane; or b) Price of sugarcane fixed or approved by the Government	Co-operative society engaged in business of manufacturing sugar
36(1)(xviii)	Marked to market loss or other expected loss as computed in accordance with the ICDS notified under section 145(2)	All Assessees
37(1)	Any other expenditure [not being personal or capital expenditure and expenditure mentioned in sections 30 to 36] laid out wholly and exclusively for purposes of business or profession5	All assessees
	B. Non-deductible items
37(2B)	Advertisement in souvenir, brochure, tract, pamphlet, etc., of political party	All assessees
40(a)(i)	Interest, royalty, fees for technical services or other chargeable sum payable outside India, or in India to a non-resident or foreign company, on which tax has not been deducted or after deduction, has not been paid on or before the due date of filing of return under section 139(1). Where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted in the previous year but paid in any subsequent year after the expiry of the time prescribed under sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid However, where deductor has failed to deduct the tax and he is not deemed to be an assessee in default under first proviso to section 201(1), then it shall be deemed that the deductor has deducted and paid the tax on the date on which the payee has furnished his return of Income.	All assessees
40(a)(ia)	30% of any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139.	All assessees
	However, where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. However, where deductor has failed to deduct the tax and he is not deemed to be an assessee in default under first proviso to section 201(1), then it shall be deemed that the deductor has deducted and paid the tax on the date on which the payee has furnished his return of Income.
40(a)(ib)	Any sum paid or payable to a non-resident which is subject to a deduction of Equalisation levy would attract disallowance if such sum was paid without deduction of such levy or if it was deducted but not deposited with the Central Government till the due date of filing of return.	All assessees
	However, where in respect of any such sum, Equalisation levy is deducted or deposited in subsequent year, as the case may be, the expenditure so disallowed shall be allowed as deduction in that year.
40(a)(ii)	Rate or tax (including surcharge or cess) levied on the profits or gains of any business or profession	All assessees
40(a)(iib)	Amount paid by way of royalty, licence fee, service fee, privilege fee, service charge or any other fee or charge, by whatever name called, which is levied exclusively on, or any amount which is appropriated, whether directly or indirectly, from a State Government undertaking by the State Government	State Govt. undertakings
40(a)(iii)	Salaries payable outside India, or in India to a non-resident, on which tax has not been paid/deducted at source	All assessees as employers
40(a)(iv)	Payments to provident fund/other funds for employee’s benefit for which no effective arrangements are made to secure that tax is deducted at source on payments made from such funds which are chargeable to tax as ‘salaries’	All assessees as employers
40(a)(v)	Tax actually paid by an employer referred to in section 10(10CC)	All assessees as employers
40(b)	Interest, salary, bonus, commission or remuneration paid to partners (subject to certain conditions and limits)	Firms
40(ba)	Interest, salary, bonus, commission or remuneration paid to members (subject to certain conditions and limits)	Association of persons or body of individuals (except a company or a co-operative society, society registered under Societies Registration Act, etc.)
40A(2)	Expenditure involving payment to relative/director/partner/substantially interested person, etc., which, in the opinion of the Assessing Officer, is excessive or unreasonable	All assessees
40A(3)	100% of payments exceeding Rs. 10,000 (Rs. 35,000 in case of payment made for plying, hiring or leasing goods carriages) made to a person in a day otherwise than by account payee cheque/bank draft or use of electronic clearing system through a bank account or through such other electric mode as may be prescribed (subject to certain conditions)	All assessees
40A(7)	Any provision for payment of gratuity to employees, other than a provision made for purposes of contribution to approved gratuity fund or for payment of gratuity that has become payable during the year (subject to specified conditions)	All assessees as employers
40A(9)	Any sum paid for setting up or formation of, or as contribution to, any fund, trust, company, AOP, BOI, Society or other institution, other than recognised provident fund/approved superannuation fund/pension scheme referred to in section 80CCD/approved gratuity fund	All assessees as employers
40(A)(13)	No deduction shall be allowed in respect of marked to market loss or other unexpected loss except as allowable under section 36(1)(xviii)	All assessee
	C. Other deductible items
42(1)	Allowances specified in agreement entered into by Central Government with any person (subject to certain conditions and terms of agreement)	Assessees engaged in prospecting for or extraction or production of mineral oils
42(2)	Expenditure remaining unclaimed as reduced by proceeds of transfer	Assessee whose business consists of prospecting for or extraction or production of petroleum and natural gas and who transfers any interest in such business
43B	Any sum which is actually paid, relating to (i) tax/duty/cess/fee levied under any law, (ii) contribution to provident fund/superannuation fund/gratuity fund/any fund for employees’ welfare, (iii) bonus/commission to employees, (iv) interest on loan/borrowing from any public financial institution, State Financial Corporation or State Industrial Investment Corporation (v)interest payments to scheduled banks/Co-operative banks (other than a primary agricultural and development bank)/primary co-operative agricultural and rural development bank on loans or advances, (vi) interest on loan or borrowings from NBFC, (vii) sum payable by employers by way of leave encashment to employees, (viii) sum payable to the Indian Railways for the use of railway assets, and (ix) sum payable to a micro or small enterprise beyond the time limit specified in section 15 of MSME Act. Deduction will not be allowed in year in which liability to pay is incurred unless actual payment is made in that year or before the due date of furnishing of return of income for that year Note: However, payment made to micro or small enterprise beyond the time limit shall be allowed as deduction only on actual payment.	All assessees
44A	Expenditure in excess of subscription, etc., received from members (subject to certain conditions and limits)	Trade, professional or similar association
44C	Head office expenditure (subject to certain conditions and limits)	Non-resident
	Against ‘capital gains’
48(i)	Expenditure incurred wholly and exclusively in connection with transfer of capital asset	All assessees
48(ii)	Cost of acquisition of capital asset and of any improvement thereto (indexed cost of acquisition and indexed cost of improvement, in case of long-term capital assets). Note : (1) The cost of acquisition/improvement shall not include the deductions claimed on the amount of interest under Section 24(b) or Chapter VIA. [Subject to exceptions contained in Explanation 1 and 2 to Section 48(iii)]. (2) The benefit of indexed cost of acquisition and indexed cost of improvement shall be available if long-term capital gain arises from the transfer which takes place before 23-07-2024.	All assessees
48(iii)	Deduction in respect of the capital gains charged to tax under section 45(4), which is attributable to the capital asset remaining with the firm	Firm, AOP or BOI
54	Long-term capital gains on sale of residential house and land appurtenant thereto invested in purchase/construction of another residential house8 (subject to certain conditions and limits)	Individual/HUF
54B	Capital gains on transfer of land used for agricultural purposes, by an individual or his parents or a HUF, invested in other land for agricultural purposes (subject to certain conditions and limits)	Individual/HUF
54D	Capital gains on compulsory acquisition of land or building forming part of an industrial undertaking invested in purchase/construction of other land/building for shifting/re-establishing said undertaking or setting up new industrial undertaking (subject to certain conditions and limits)	Any assessee
54EC	Long-term capital gains arising from transfer of land or building. The exemption9 is allowed if the amount of capital gains is invested in bonds of NHAI, REC or any other notified bond.	Any assessee
54EE	Long-term capital gain invested in long-term specified assets being units of such fund as may be notified by Central Government to finance start-ups	All assesses
54F	Net consideration on transfer of long-term capital asset other than residential house invested in residential house10 (subject to certain conditions and limits)	Individual/HUF
54G	Capital gain on transfer of machinery, plant, land or building used for the purposes of the business of an industrial undertaking situate in an urban area (transfer being effected for shifting the undertaking to a non-urban area) invested in new machinery, plant, building or land, in the said non-urban area, expenses on shifting, etc. (subject to certain conditions and limits)	Any assessee
54GA	Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area to any Special Economic Zone (subject to certain conditions and limits)	All assessees
54GB	Exemption in respect of capital gain arising from the transfer of a long-term capital asset, being a residential property (a house or a plot of land), owned by the eligible assessee, and such assessee before the due date of furnishing of return of income under sub-section (1) of section 139 utilises the net consideration for subscription in the equity shares of an eligible company and such company has, within one year from the date of subscription in equity shares by the assessee, utilised this amount for purchase of specified new asset (subject to certain conditions and limits).	Individual/HUF
	W.e.f. April 1, 2017, eligible start-up is also included in definition of eligible company.
	Against ‘income from other sources’ A. Deductible items
57(i)	Deduction from dividend income on account of interest expense, which shall not exceed 20% of the dividend income.	All assessees
57(i)	Any reasonable sum paid by way of commission or remuneration for the purpose of realising interest on securities	All assessees
57(ia)	Contributions to any provident fund or superannuation fund or any fund set up under Employees’ State Insurance Act, 1948 or any other fund for welfare of employees, if the same are credited to employees’ accounts in relevant funds before due date	All assessees
57(ii)	Repairs, insurance, and depreciation of building, plant and machinery and furniture	Assessees engaged in business of letting out of machinery, plant and furniture and buildings on hire
57(iia)	In case of family pension, 331/3 per cent of such pension or Rs. 15,000, whichever is less Note: the enhanced threshold of Rs. 25,000 shall be applicable if income-tax is computed under section 115BAC(1A)(ii).	Assessees in receipt of family pension on death of employee being member of assessee’s family
57(iii)	Any other expenditure (not being capital expenditure) expended wholly and exclusively for earning such income	All assessees
57(iv)	In case of interest received on compensation or on enhanced compensation referred to in section 145A(2), a deduction of 50 per cent of such income (subject to certain conditions)	All assessees
	B. Non-deductible items
58(1)(a)(i)	Personal expenses	All assessees
58(1)(a)(ii)	Interest chargeable to tax which is payable outside India on which tax has not been paid or deducted at source	All assessees
58(1)(a)(iii)	‘Salaries’ payable outside India on which no tax is paid or deducted at source	All assessees
58(1A)	Disallowance due to TDS default (Covered by section 40(a)(ia) and 40(a)(iia))	All assessees
58(2)	Expenditure of the nature specified in section 40A	All assessees
58(4)	Expenditure in connection with winnings from lotteries, crossword puzzles, races, games, gambling or betting	All assessees
	For certain payments
80C	■ Life insurance premium for policy : – in case of individual, on life of assessee, assessee’s spouse and any child of assessee – in case of HUF, on life of any member of the HUF ■ Sum paid under a contract for a deferred annuity : – in case of individual, on life of the individual, individual’s spouse and any child of the individual (however, contract should not contain an option to receive cash payment in lieu of annuity) – in case of HUF, on life of any member of the HUF ■ Sum deducted from salary payable to Government servant for securing deferred annuity or making provision for his wife/children [qualifying amount limited to 20% of salary] ■ Contributions by an individual made under Employees’ Provident Fund Scheme ■ Contribution to Public Provident Fund Account in the name of: – in case of individual, such individual or his spouse or any child of such individual – in case of HUF, any member of HUF ■ Contribution by an employee to a recognised provident fund ■ Contribution by an employee to an approved superannuation fund ■ Subscription to any notified security or notified deposit scheme of the Central Government. For this purpose, Sukanya Samriddhi Account Scheme has been notified vide Notification No. 9/2015, dated 21.01.2015. Any sum deposited during the year in Sukanya Samriddhi Account by an individual would be eligible for deduction. ■ Amount can be deposited by an individual or in the name of girl child of an individual or in the name of the girl child for whom such an individual is the legal guardian. ■ Subscription to notified savings certificates [National Savings Certificates (VIII Issue)] ■ Contribution for participation in unit-linked Insurance Plan of UTI : – in case of an individual, in the name of the individual, his spouse or any child of such individual – in case of a HUF, in the name of any member thereof ■ Contribution to notified unit-linked insurance plan of LIC Mutual Fund [Dhanaraksha 1989] – in the case of an individual, in the name of the individual, his spouse or any child of such individual – in the case of a HUF, in the name of any member thereof ■ Subscription to notified deposit scheme or notified pension fund set up by National Housing Bank [Home Loan Account Scheme/National Housing Banks (Tax Saving) Term Deposit Scheme, 2008] ■ Tuition fees (excluding development fees, donations, etc.) paid by an individual to any university, college, school or other educational institution situated in India, for full time education of any 2 of his/her children ■ Certain payments for purchase/construction of residential house property ■ Subscription to notified schemes of (a) public sector companies engaged in providing long-term finance for purchase/construction of houses in India for residential purposes/(b) authority constituted under any law for satisfying need for housing accommodation or for planning, development or improvement of cities, towns and villages, or for both ■ Sum paid towards notified annuity plan of LIC (New Jeevan Dhara/New Jeevan Dhara-I/New Jeevan Akshay/New Jeevan Akshay-I/New Jeevan Akshay-II/Jeewan Akshay-III plan of LIC) or other insurer ■ Subscription to any units of any notified [u/s 10(23D)] Mutual Fund or the UTI (Equity Linked Saving Scheme, 2005) ■ Contribution by an individual to any pension fund set up by any mutual fund which is referred to in section 10(23D) or by the UTI (UTI Retirement Benefit Pension Fund) ■ Subscription to equity shares or debentures forming part of any approved eligible issue of capital made by a public company or public financial institutions ■ Subscription to any units of any approved mutual fund referred to in section 10(23D), provided amount of subscription to such units is subscribed only in ‘eligible issue of capital’ referred to above. ■ Term deposits for a fixed period of not less than 5 years with a scheduled bank, and which is in accordance with a scheme11 framed and notified. ■ Subscription to notified bonds issued by the NABARD. ■ Deposit in an account under the Senior Citizen Savings Scheme Rules, 2004 (subject to certain conditions) ■ 5-year term deposit in an account under the Post Office Time Deposit Rules, 1981 (subject to certain conditions) ■ Contribution to specified account of the pension scheme referred to in 80CCD, in case of central Government employee.	Individual/HUF

Notes:

1. Deduction is limited to whole of the amount paid or deposited subject to a maximum of Rs. 1,50,000¹². This maximum limit of Rs. 1,50,000¹² is the aggregate of the deduction that may be claimed under sections 80C, 80CCC and 80CCD.

2. The sums paid or deposited need not be out of income chargeable to tax of the previous year. Amount may be paid or deposited any time during the previous year, but the deduction shall be available on so much of the aggregate of sums as do not exceed the total income chargeable to tax during the previous year.

3. Life Insurance premium is part of gross qualifying amount for the purpose of deduction under section 80C. Payment of premium which is in excess of 10 per cent (if policy is issued on or after 1-4-2013, 15% in case of insurance on life of person with disability referred to in section 80U or suffering from disease or ailment specified in section 80DDB/rule 11DD) of actual capital sum assured shall not be included in gross qualifying amount. The value of any premiums agreed to be returned or of any benefit by way of bonus or otherwise, over and above the sum actually assured, which is to be or may be received under the policy by any person, shall not be taken into account for the purpose of calculating the actual capital sum assured.

The limit of 10 per cent will be applicable only in the case of policies issued on or after 1-4-2012. In respect of policies issued prior to 1-4-2012, the old limit of 20 per cent of actual sum assured will be applicable.

With effect from 1-4-2013, ‘actual capital sum assured’ in relation to a life insurance policy shall mean the minimum amount assured under the policy on happening of the insured event at any time during the term of the policy, not taking into account—

(i)  the value of any premium agreed to be returned; or

(ii) any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person.

4. Where, in any previous year, an assessee—

(i)  terminates his contract of insurance, by notice to that effect or where the contract ceases to be in force by reason of failure to pay any premium, by not reviving contract of insurance,—

(a) in case of any single premium policy, within two years after the date of commencement of insurance; or

(b) in any other case, before premiums have been paid for two years; or

(ii) terminates his participation in any unit-linked insurance plan (ULIP), by notice to that effect or where he ceases to participate by reason of failure to pay any contribution, by not reviving his participation, before contributions in respect of such participation have been paid for five years; or

(iii) transfers the house property before the expiry of five years from the end of the financial year in which possession of such property is obtained by him, or receives back, whether by way of refund or otherwise, any sum specified in that clause,

then,—

(a) no deduction shall be allowed to the assessee with reference to any of such sums, paid in such previous year; and

(b) the aggregate amount of the deductions of income so allowed in respect of the previous year or years preceding such previous year, shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.

If any equity shares or debentures, with reference to the cost of which a deduction is allowed, are sold or otherwise transferred by the assessee to any person at any time within a period of three years from the date of their acquisition, the aggregate amount of the deductions of income so allowed in respect of such equity shares or debentures in the previous year or years preceding the previous year in which such sale or transfer has taken place shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.

A person shall be treated as having acquired any shares or debentures on the date on which his name is entered in relation to those shares or debentures in the register of members or of debenture-holders, as the case may be, of the public company.

5. If any amount, including interest accrued thereon, is withdrawn by the assessee from his deposit account made under (a) Senior Citizen Saving Scheme or (b) Post Office Time Deposit Rules, before the expiry of the period of five years from the date of its deposit, the amount so withdrawn shall be deemed to be the income of the assessee of the previous year in which the amount is withdrawn and shall be liable to tax in the assessment year relevant to such previous year.

The amount liable to tax shall not include the following amounts, namely:—

(i) any amount of interest, relating to deposits referred to above, which has been included in the total income of the assessee of the previous year or years preceding such previous year; and

(ii) any amount received by the nominee or legal heir of the assessee, on the death of such assessee, other than interest, if any, accrued thereon, which was not included in the total income of the assessee for the previous year or years preceding such previous year.

Section	Nature of deduction	Who can claim
(1)	(2)	(3)
80CCC13	Contributions to certain pension funds of LIC or any other insurer (up to Rs. 1,50,000) (subject to certain conditions)14	Individual
1480CCD	Contribution to pension scheme notified by Central Government up to 10% of salary (subject to certain conditions and limits)15 Contribution made by employer shall also be allowed as deduction under 80CCD(2) while computing total income of the employee. However, amount of deduction could not exceed 14% of salary where contribution is made by central/state government and 10%* of salary, where contribution is made by any other employee. * 14% in case income of assessee is chargeable to tax under section 115BAC(1A) (new tax regime). Note: Amount deposited in the minor’s account is also allowed as deduction. The deduction is allowed to the parent subject to a maximum limit of Rs 50,000.	Individual
80CCH	Amount paid/deposited in Agniveer Corpus Fund by assessee and contribution made by Central Government to such fund	Individual
80D17	Amount paid (in any mode other than cash) by an individual or HUF to LIC or other insurer to effect or keep in force an insurance on the health of specified person. An individual can also make payment to the Central Government health scheme and/or on account of preventive health check-up (subject to limit)	Individual/HUF
	■  specified person means: –   In case of Individual – self, spouse, dependent children or parents –   In case of HUF – Any member thereof ■  Deduction for preventive health check-up shall not exceed in aggregate Rs. 5,000. ■  Payment on account of preventive health check-up may be made in cash.
80DD	Deduction of Rs. 75,000 (Rs. 1,25,000 in case of severe disability) to a resident individual/HUF where (a) any expenditure has been incurred for the medical treatment (including nursing), training and rehabilitation of a dependant, being a person with disability [as defined under Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995] (w.e.f. assessment year 2005-06 including autism, cerebral palsy and multiple disability as referred to in National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities Act, 1999), or (b) any amount is paid or deposited under an approved scheme framed in this behalf by the LIC or any other insurer or the Administrator or the specified company for the maintenance of a dependent, being a person with disability (subject to certain conditions)	Resident Individual/HUF
80DDB	Expenses actually paid for medical treatment of specified diseases and ailments subject to certain conditions18	Resident Individual/HUF
80E	Amount paid out of income chargeable to tax by way of payment of interest on loan taken from financial institution/approved charitable institution for pursuing higher education19 (subject to certain conditions) (maximum period : 8 years)	Individual
80EE	Interest payable on loan taken by an individual from any financial institution for the purpose of acquisition of a residential house property subject to certain condition. (Maximum deduction 50,000)	Individual
80EEA	Interest payable on loan taken by an individual, who is not eligible to claim deduction under 80EE, from any financial institution for the purpose of acquisition of a residential house property subject to certain condition. (Maximum deduction 1,50,000)	Individual
80EEB	Interest payable on loan taken by an individual from any financial institution for the purpose of purchase of an electric vehicle subject to certain condition. (Maximum deduction 1,50,000)	Individual
80G	Donations to certain approved funds, trusts, charitable institutions/donations for renovation or repairs of notified temples, etc. [amount of deduction is 50 per cent of net qualifying amount]. 100 per cent of qualifying donations to National Defence Fund, Prime Minister’s National Relief Fund, Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND) Prime Minister’s Armenia Earthquake Relief Fund, Africa (Public Contributions – India) Fund, National Children’s Fund (from 1-4-2014), Government or approved association for promoting family planning, universities and approved educational institutions of national eminence, National Foundation for Communal Harmony, Chief Minister’s Earthquake Relief Fund (Maharashtra), Zila Saksharta Samitis, National or State Blood Transfusion Council, Fund set up by State Government to provide medical relief to the poor, Army Central Welfare Fund, Indian Naval Benevolent Fund and Air Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, National Illness Assistance Fund, Chief Minister’s Relief Fund or the Lt. Governor’s Relief Fund in respect of any State or Union Territory, National Sports Fund, National Cultural Fund, Fund for Technology Development and Application, Indian Olympic Association, etc.20, fund set up by State Government of Gujarat exclusively for providing relief to victims of earthquake in Gujarat, National Trust for Welfare of Persons with Autism, Cerebral palsy, Mental retardation and Multiple Disabilities, and sums paid between 26-1-2001 and 30-9-2001 to any eligible trust, institution or fund for providing relief to Gujarat earthquake victims21, the Swachh Bharat Kosh and the Clean Ganga Fund (from assessment year 2015-16) and National Fund for Control of Drug Abuse (from assessment year 2016-17) [subject to certain conditions and limits]22	All assessees
80GG	Rent paid in excess of 10% of total income for furnished/unfurnished residential accommodation (subject to maximum of Rs. 5,000 p.m. or 25% of total income, whichever is less) (subject to certain conditions)	Individuals not receiving any house rent allowance
80GGA23	Certain donations for scientific, social or statistical research or rural development programme or for carrying out an eligible project or scheme or National Urban Poverty Eradication Fund (subject to certain conditions)	All assessees not having any income chargeable under the head ‘Profits and gains of business or profession’
80GGB	Sum contributed to any political party/electoral trust24	Indian company
80GGC	Sum contributed to any political party/electoral trust24	All assessees, other than local authority and artificial juridical person wholly or partly funded by Government
	For certain incomes
80-IA	Profits and gains from industrial undertakings engaged in infrastructure facility, telecommunication services, industrial park, development of Special Economic Zone, power undertakings, etc. (subject to certain conditions and limits)25	All assessees
	No deduction under this section shall be available to an enterprise which starts the development or operation and maintenance of the infrastructure facility on or after the 1st day of April, 2017.
80-IAB	Profits and gains derived by undertaking/enterprise from business of developing a Special Economic Zone notified on or after 1-4-2005 (subject to certain conditions and limits)	Assessee being Developer of SEZ
	No deduction under this section shall be available to an assessee, being a developer, where the development of Special Economic Zone begins on or after the 1st day of April, 2017.
80-IAC	Profit and gains derived by an eligible start-up from specified business (subject to certain conditions)27	Company and LLP
80-IB	Profits and gains from industrial undertakings, cold storage plant, hotel, scientific research & development, mineral oil concern, housing projects, cold chain facility, multiplex theatres, convention centres, ships, etc. (subject to certain conditions and limits)	All assessees No deduction shall be available to an enterprise which commence the business activity on or after 1-4-2017.
80-IBA	Profits and gains derived by assessee from the business of developing and building affordable housing projects. (subject to certain conditions)	All assessees
80-IC	Profits and gains derived by an undertaking or an enterprise in special category States (Himachal Pradesh, Uttaranchal, Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura) (subject to certain limits, time limits and conditions), (a) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the specified period. (b) which has begun or begins to manufacture or produce any article or thing specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during the specified period	All assessees
80-ID	Profits and gains from business of hotels and convention centres in specified areas (subject to certain conditions).	All assessees
80-IE	Deduction in respect of certain undertakings in North Eastern States.	All assessees
80JJA	Entire income from business of collecting and processing or treating of bio-degradable waste for generating power, or producing bio-fertilizers, bio-pesticides or other biological agents or for producing bio-gas, making pellets or briquettes for fuel or organic manure (for 5 consecutive assessment years)	All assessees
80JJAA	Deduction of 30% of additional employee cost in respect of employment of new employees.	Assessee to whom section 44AB applies
	Additional employee cost means total emoluments paid or payable to additional employees employed during the previous year.
	Deduction shall be allowed for first three Assessment Years including the Assessment Year relevant to previous year in which such employment is provided.
	(Subject to certain other condition)
80LA	Certain incomes of Scheduled banks/banks incorporated outside India having Offshore Banking Units in a Special Economic Zone/Units of International Financial Services Centre (subject to certain conditions and limits)	Scheduled Banks/banks incorporated outside India/Units of International Financial Services Centre
80M	Inter-corporate dividend shall be allowed to be reduced from total income of company receiving the dividend if same is further distributed to shareholders within the prescribed period.	Domestic Company
80P	Specified incomes [subject to varying limits specified in sub-section (2)]	Co-operative societies
80PA	Profit derived from processing or marketing of agricultural produce.	Producer Company
80QQB	Royalty income of author of certain specified category of books (up to Rs. 3,00,000) (subject to certain conditions)	Resident Individual – Author
80RRB	Royalty on patents up to Rs. 3,00,000 in the case of a resident individual who is a patentee and is in receipt of income by way of royalty in respect of a patent registered on or after 1-4-2003 (subject to certain conditions).	Resident individuals
80TTA	Interest on deposits in savings bank accounts (up to Rs. 10,000 per year)	Individuals/HUFs (except Senior Citizen)
80TTB	Interest on deposit in saving account or fixed deposit (upto Rs. 50,000 per year)	Senior citizen
80U	Deduction of Rs. 75,000 to a resident individual who, at any time during the previous year, is certified by the medical authority to be a person with disability [as defined under Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995] [w.e.f. assessment year 2005-06 including autism, cerebral palsy, and multiple disabilities as defined under National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities Act, 1999] [in the case of a person with severe disability, allowable deduction is Rs. 1,25,000] (subject to certain conditions).	Resident individuals
	Rebates
87A	Tax rebate in case of individual resident in India, whose total income does not exceed Rs. 5,00,000. Quantum of rebate shall be an amount equal to hundred per cent of such income-tax or an amount of Rs. 12,500, whichever is less. Further, a maximum rebate of Rs. 60,000 is allowed under 87A from the amount of income tax on total income, which is chargeable to tax under section 115BAC(1A). However, this rebate is allowed if the total income of assessee chargeable to tax under section 115BAC(1A) is up to Rs. 12,00,000. Note: The total rebate under section 87A shall not exceed the amount of income tax payable as per the rates provided in section 115BAC(1A) [effective from AY 2026-27]	Resident Individual

Notes:

1. Provisions of section 32 shall apply whether or not the assessee has claimed depreciation.

2. If sum is borrowed for acquiring a capital asset, interest thereon pertaining to the period before asset is first put to use shall not be allowed as deduction.

3. W.e.f. assessment year 2016-17, bad-debts shall be allowed as deduction even if they are not written-off from books of accounts. Such deduction shall be allowed if amount of debt or part thereof has been taken into account in computing income on the basis of Income Computation and Disclosure Standards notified under section 145(2) without recording the same in the accounts.

4. With effect from assessment year 2018-19 business of developing or maintaining and operating or developing, maintaining and operating a new infrastructure facility, has been included.

♦ Section 35AD was amended by Finance (No. 2) Act, 2014 with effect from assessment year 2015-16 :

With a view to ensure that the capital asset on which investment linked deduction has been claimed is used for the purposes of the specified business, sub-section (7A) has been inserted in section 35AD to provide that any asset in respect of which a deduction is claimed and allowed shall be used only for the specified business for a period of 8 years beginning with the previous year in which such asset is acquired or constructed. Moreover, if such asset is used for any purpose other than the specified business, the total amount of deduction so claimed and allowed in any previous year in respect of such asset (as reduced by the amount of depreciation allowable in accordance with the provisions of section 32 as if no deduction had been allowed), shall be deemed to be income of the assessee chargeable under the head “Profits and gains of business or profession” of the previous year in which the asset is so used. However, this provision will not apply to a company which has become a sick industrial company under section 17(1) of the Sick Industrial Companies (Special Provisions) Act within the time period of 8 years as stated above.

♦ Where any deduction under section 35AD has been availed of by the assessee on account of capital expenditure incurred for the purposes of specified business in any assessment year, no deduction under section 10AA shall be available to the assessee in the same or any other assessment year in respect of such specified business.

5. With effect from assessment year 2015-16 a new Explanation 2 has been inserted in section 37(1) to clarify that expenditure incurred by the assessee on Corporate Social Responsibility activities in accordance with section 135 of the Companies Act, 2013 will not be considered as expenditure incurred by the assessee for the purposes of the business or profession.

Further, with effect from assessment year 2022-23, a new Explanation 3 has been inserted in section 37(1) to clarify that expenditure incurred to provide perquisite, in whatever form to any person, irrespective of whether the recipient is engaged in any business or profession, where the acceptance of such benefit or perquisite is a violation of any rule, law or regulation, which governs the recipient, shall be deemed to have not been incurred for business or profession and accordingly, the deduction for the same shall not be available. Furthermore, the expenditure, whether constituting an offence as per the prevailing laws in India or outside India, or prohibited by any law in force – whether in India or outside India, shall not be eligible for deduction under section 37(1) .

8. One residential house in India with effect from assessment year 2015-16. With effect from Assessment Year 2020-21, a taxpayer has an option to make investment in two residential house properties in India. This option can be exercised by the taxpayer only once in his lifetime provided the amount of long-term capital gain does not exceed Rs. 2 crores. With effect from Assessment Year 2023-24, the exemption shall be limited to Rs. 10 crores.

10. One residential house in India with effect from assessment year 2015-16. With effect from Assessment Year 2023-24, the aggregate of amount invested in new house property and deposited in capital gain account scheme shall be considered as eligible investment to the extent of Rs. 10 crores.

11. See Bank Term Deposits Scheme, 2006.

12. with effect from assessment year 2015-16.

13. Where deduction is claimed under this section, deduction in relation to same amount cannot be claimed under section 80C.

14. section 80CCE provides that the aggregate amount of deductions under section 80C, section 80CCC and section 80CCD(1) shall not, in any case, exceed Rs. 1,50,000

With effect from assessment year 2015-16, amended sub-section (1) has clarified that a non-government employee can claim deduction under section 80CCD even if his date of joining is prior to January 1, 2004.

15. With effect from the assessment year 2012-13 section 80CCE is amended so as to provide that contribution made by the Central Government or any other employer to a pension scheme under sub-section (2) of section 80CCD shall not be included in the limit of deduction of Rs. 1,50,000 provided under section 80CCE.

With effect from assessment year 2016-17, sub-section (1A) of section 80CCD which laid down maximum deduction limit of Rs. 1,00,000 (under sub-section (1)) has been deleted.

Further, a new sub-section (1B) is inserted to provide for additional deduction to the extent of Rs. 50,000. The additional deduction is not subject to ceiling limit of Rs. 1,50,000 as provided under section 80CCE.

However, it is to be noted that additional deduction of Rs. 50,000 shall not be allowed in respect of contribution which is considered for deduction under section 80CCD(1), i.e., within limit of 10% of salary/gross total income

Any payment from NPS to an employee because of closure or his opting out of the pension scheme is chargeable to tax. However, with effect from the assessment year 2017-18, the whole amount received by the nominee from NPS on death of the assessee shall be exempt from tax.

17. The deduction under Section 80Dwill be available as per the limit specified below:

Individual	HUF
For self, spouse and dependent children : Rs. 25,000 (Rs. 50,000 if person insured is a senior citizen*);	Premium up to Rs. 25,000 (Rs. 50,000 if member insured is a senior citizen) paid to insure any member of the family.
For parents of the assessee : (Additional) Rs. 25,000 (Rs. 50,000 if person insured is a senior citizen)	NA
Medical expenditure if no amount is paid in respect of health insurance-Rs.50,000 (only in case of senior citizen)	Medical expenditure if no amount is paid in respect of health insurance-Rs.50,000 (only in case of senior citizen)
Aggregate amount of deduction cannot exceed Rs.1,00,000 in any case	Aggregate amount of deduction cannot exceed Rs.50,000 in any case.

*‘Senior citizen’ means an individual resident in India who is of the age of sixty years or more at any time during the relevant previous year.

18. Maximum deduction is Rs. 40,000 (Rs. 1,00,000 where expenditure is incurred for a senior citizen [w.e.f assessment year 2019-20])

With effect from assessment year 2016-17, the taxpayer shall be required to obtain a prescription from a specialist doctor (not necessarily from a doctor working in a Government hospital) for availing this deduction.

19. Scope of ‘higher education’ is enlarged with effect from assessment year 2010-11 to cover any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, Board or university recognised by the Central Government or State Government or local authority or by any other authority authorized by the Central Government or State Government or local authority to do so.

With effect from 1-4-2010 the scope of expression ‘relative’ has also been enlarged to cover the student for whom the taxpayer is the legal guardian.

20. Donation of any sums paid by the assessee, being a company, in the previous year as donations to the Indian Olympic Association or to any other association or institution established in India, as the Central Government may, having regard to the prescribed guidelines, by notification in the Official Gazette, specify in this behalf for—

(i)  the development of infrastructure for sports and games; or

(ii)  the sponsorship of sports and games,

in India;

is eligible for the purpose of deduction under section 80G [this is in consequence of omission of section 10(23)].

21. Donation made to an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both is also eligible for the purpose of deduction under section 80G from the assessment year 2003-04 [this is in consequence of omission of section 10(20A)].

22. With effect from 1-4-2013 no deduction shall be allowed in respect of donation of any sum exceeding two thousand rupees unless such sum is paid by any mode other than cash.

23. With effect from 1-4-2013 no deduction shall be allowed under this section in respect of any sum exceeding ten thousand rupees unless such sum is paid by any mode other than cash.

24. With effect from 1-4-2014 deduction will not be allowed if sum is contributed in cash.

25. Time limits stated under section 80-IA(4)(iv) have been extended from 31-3-2014 to 31-3-2017.

26. 100% deduction shall be allowed from the AY beginning on or after the 1st day of April, 2021.

27. With effect from Assessment Year 2018-19:

i. ‘Eligible business’ means a business carried out by an eligible start up engaged in innovation, development or improvement of products or processes or services or a scalable business model with a high potential of employment generation or wealth creation.

ii. “Eligible start-up” means a company or a limited liability partnership engaged in eligible business which fulfils the following conditions, namely:

a. it is incorporated on or after the 1st day of April, 2016 but before the 1st day of April, 2025

b. the total turnover of its business does not exceed 100 crore rupees in the previous years in which deduction is claimed; and

c. it holds a certificate of eligible business from the Inter-Ministerial Board of Certification as notified in the Official Gazette by the Central Government

Tutorials

Maintenance of Books of Accounts

Introduction

Section 44AA of the Income-tax Act mandates the maintenance of books of account by certain persons engaged in specified professions and businesses. It provides for the preparation and maintenance of books of account by a person if his income or gross turnover or receipts, as the case may be, exceeds the prescribed threshold limit.

Who is required to maintain books of accounts?

An assessee is required to maintain books of accounts if their income or gross turnover/receipts during the specified period exceeds the prescribed threshold limit specified in the income tax laws. Section 44AA specified the threshold limit as per the nature of business or profession which is given below:

(a) Specified Professions

(b) Non-Specified Professions

(c) Business eligible for presumptive taxation scheme under Section 44AD, 44AE , 44BB , or 44BBB

(d) Other Business

Specified Professions

Specified professionals are required to maintain their books of accounts irrespective of their gross receipts and income except where a presumptive taxation scheme under Section 44ADA is opted.

Specified professionals include any person engaged in Legal, Medical, Engineering, Architectural, Technical Consultancy, Interior decoration, Film artist, Authorized Representative, Accountancy Profession, Company secretary, or Information Technology.

Non-Specified Professions

Non-specified professionals are required to maintain books of account if the income from their profession or gross receipts of such profession exceeds the threshold given below:

a) For individual or HUF: if the income from such profession exceeds Rs. 2,50,000 or Gross receipts exceeds Rs. 25 lakhs, in any of the 3 years immediately preceding the previous year.

b) For others: if the income from such profession exceeds Rs. 1,20,000 or Gross receipts exceed Rs. 10 lakhs, in any of the 3 years immediately preceding the previous year.

Business eligible for presumptive taxation scheme under Section 44AD, 44AE , 44BB , or 44BBB

A Business entity opting for presumptive tax scheme under section 44AD, 44AE , 44BB , or 44BBB is required to maintain books of account in accordance with following norms:

a) Businesses eligible for presumptive tax scheme under section 44AD

• • For resident individuals or HUFs – if the income of the assessee exceeds the maximum exemption limit and he has opted for the presumptive scheme in any of the last 5 previous years but does not opt for the same in the current year.
  • For resident partnership firm – The taxpayer has opted for the scheme in any of the last 5 previous years but does not opt for the same in the current year.

b) Businesses eligible for presumptive tax scheme under Section 44AE-if the taxpayer (engaged in plying, hiring, or leasing goods carriage) claims that the profits are lower than the deemed profits.

c) Businesses eligible for Presumptive Tax Scheme under Section 44BB-if the taxpayer (non-resident assessee engaged in the exploration of mineral oil) claims that the profits are lower than the deemed profits.

d) Businesses eligible for Presumptive Tax Scheme under Section 44BBB-if the taxpayer (a foreign company engaged in civil construction) claims that the profits are lower than the deemed profits.

Other Business

A Business entity is required to maintain books of account if income from business or gross turnover of such business exceeds the threshold given below:

a) For individual or HUF: if the income from such business exceeds Rs. 2,50,000 or Gross turnover exceeds Rs. 25 lakhs, in any of the 3 years immediately preceding the previous year.

b) For others: if the income from such business exceeds Rs. 1,20,000 or Gross turnover exceeds Rs. 10 lakhs, in any of the 3 years immediately preceding the previous year.

Note: Where a business or profession has been set up during the previous year, the threshold limit of income or gross turnover/receipts of the current year shall be considered.

Which books of accounts are required to be maintained?

Rule 2F of the Income-tax Rules prescribes the following books of accounts to be maintained under section 44AA :

1. For specified professions other than company secretary and information technology (where gross receipts exceed Rs. 1,50,000 in any of the 3 years immediately preceding the previous year) –

a) Cash book

b) Journal, if books of accounts are maintained according to the mercantile system of accounting

c) Ledgers

d) Carbon copies of bills and carbon copies or counterfoil of receipts issued by the assessee of value exceeding Rs. 25 (must be machine numbered or serially numbered)

e) Original bills issued to the assessee and receipts in respect of the expenditures incurred by him.

f) Signed vouchers, if bills and receipts are not issued and the amount of expenditure does not exceed Rs. 50 if the cash book does not contain adequate particulars in respect of these expenditures.

However, for medical professions, the following additional books are required to be maintained:

– Daily case register in Form 3C

– Inventory under broad heads of stock of drugs, medicines, and other consumable accessories used for the purpose of profession, as on the first and last day of the previous year.

2. For specified professions (in every other case), and non-specified professions & businesses where gross receipts exceed Rs. 1,50,000 in any of the 3 years immediately preceding the previous year –

Such books of account which may enable the Assessing Officer to compute the taxable income.

Other Provisions

Where books of account and other documents should be kept and maintained?

Books of account and other documents should be kept and maintained by the person at the place where he is carrying on the profession or, where the profession is carried on at more than one place, at the principal place of his profession.

However, where the person keeps and maintains separate books of account in respect of each place where the profession is carried on, such books of account and other documents may be kept and maintained at the respective places at which the profession is carried on.

Period of maintenance

Books of account and documents should be kept and maintained for a period of 6 years from the end of the relevant assessment year.

However, if the assessment in relation to any assessment year has been reopened under Section 147 within the prescribed period, all the books of account and other documents which were kept and maintained at the time of reopening of the assessment should be kept and maintained until the assessment so reopened has been completed.

Penalty for non-compliance

If an assessee fails to maintain or retain books of account and other documents for the specified period in accordance with this provision, a penalty may be imposed under Section 271A of Rs. 25,000.

MCQs on Maintenance of Books of Accounts

Q1. Section 44AA specified the threshold limit for maintenance of books of accounts for which of the following taxpayers?

(a) Specified Professions

(b) Non-Specified Professions

(c) Business

(d) All of the above

Correct answer: (d)

Justification of correct answer: Section 44AA specified the threshold limit as per the nature of business or profession which is given below:

1. Specified Professions

2. Non-Specified Professions

3. Business eligible for presumptive taxation scheme under Section 44AD, 44AE, 44BB, or 44BBB

4. Other Business

Q2. Which of the following persons are required to maintain books of accounts irrespective of the gross receipts and income except where a presumptive taxation scheme under Section 44ADA is opted?

(a) Specified Professions

(b) Non-Specified Professions

(c) Business eligible for presumptive taxation scheme under Section 44AD, 44AE , 44BB , or 44BBB

(d) All of the above

Correct answer: (a)

Justification of correct answer: Specified professionals are required to maintain their books of accounts irrespective of their gross receipts and income except where a presumptive taxation scheme under Section 44ADA is opted.

Specified professionals include any person engaged in Legal, Medical, Engineering, Architectural, Technical Consultancy, Interior decoration, Film artist, Authorized Representative, Accountancy Profession, Company secretary, or Information Technology.

Q3. Non-specified professionals (Individuals) are required to maintain books of account if the income from their profession or gross receipts of such profession exceeds ________.

(a) Income exceeds Rs. 2,50,000 or Gross receipts exceeds Rs. 25 lakhs, in any of the 3 years immediately preceding the previous year

(b) Income exceeds Rs. 1,20,000 or Gross receipts exceed Rs. 10 lakhs, in any of the 3 years immediately preceding the previous year

(c) either (a) or (b)

(d) None of the above

Correct answer: (a)

Justification of correct answer: Non-specified professionals are required to maintain books of account if the income from their profession or gross receipts of such profession exceeds the threshold given below:

(a) For individual or HUF: if the income from such profession exceeds Rs. 2,50,000 or Gross receipts exceeds Rs. 25 lakhs, in any of the 3 years immediately preceding the previous year.

(b) For others: if the income from such profession exceeds Rs. 1,20,000 or Gross receipts exceed Rs. 10 lakhs, in any of the 3 years immediately preceding the previous year.

Q4. Resident Individual eligible for presumptive tax scheme under section 44AD is required to maintain books of account if the income of the assessee exceeds the maximum exemption limit and he has opted for the presumptive scheme in any of the last 5 previous years but does not opt for the same in the current year.

(a) True

(b) False

Correct answer: (a)

Justification of correct answer: Resident Individual or HUFs eligible for presumptive tax scheme under section 44AD is required to maintain books of account if the income of the assessee exceeds the maximum exemption limit and he has opted for the presumptive scheme in any of the last 5 previous years but does not opt for the same in the current year.

Q5. Resident Individual eligible for presumptive tax scheme under Section 44AE is required to maintain books of account if the income of the assessee exceeds the maximum exemption limit and he has opted for the presumptive scheme in any of the last 5 previous years but does not opt for the same in the current year.

(a) True

(b) False

Correct answer: (b)

Justification of correct answer: Businesses eligible for presumptive tax scheme under Section 44AE are required to maintain books of accounts if the taxpayer (engaged in plying, hiring, or leasing goods carriage) claims that the profits are lower than the deemed profits.

Q6: ABC Ltd. engaged in the business of manufacturing paper is required to maintain books of accounts if _________.

(a) Income from business exceeds Rs. 2,50,000 or Gross turnover exceeds Rs. 25 lakhs, in any of the 3 years immediately preceding the previous year.

(b) Income from such business exceeds Rs. 1,20,000 or Gross turnover exceeds Rs. 10 lakhs, in any of the 3 years immediately preceding the previous year.

(c) Either (a) or (b)

(d) None of the above

Correct answer: (b)

Justification of correct answer: A Business entity is required to maintain books of account if the income from such business exceeds Rs. 1,20,000 or Gross turnover exceeds Rs. 10 lakhs, in any of the 3 years immediately preceding the previous year.

Comment on the incorrect answer: An individual or HUF is required to maintain books of account if the income from such business exceeds Rs. 2,50,000 or Gross turnover exceeds Rs. 25 lakhs, in any of the 3 years immediately preceding the previous year.

Q7. Books of account and documents should be kept and maintained for a period of _________ from the end of the relevant assessment year.

(a) 6 years

(b) 7 years

(c) 5 years

(d) No Limit

Correct answer: (a)

Justification of correct answer: Books of account and documents should be kept and maintained for a period of 6 years from the end of the relevant assessment year.

Q8. What is the penalty if an assessee fails to maintain or retain books of account and other documents for the specified period in accordance with this provision?

(a) 10,000

(b) 25,000

(c) 1,00,000

(d) No Penalty

Correct answer: (b)

Justification of correct answer: If an assessee fails to maintain or retain books of account and other documents for the specified period in accordance with this provision, a penalty may be imposed under Section 271A of Rs. 25,000.

Prohibited transaction in cash/limit on cash transactions​

Income-tax Act has several provisions that restrict receipt or payment made in cash by a person subject to a certain threshold limit. These restrictions have been introduced to move towards a cashless economy and to reduce the generation and circulation of black money.

Disallowance of cash payments [Section 40A(3)]

Section 40A(3) provides that if the payment or aggregate of payments for an expenditure to a person in a day exceeds Rs. 10,000 and it is made by any mode other than account payee cheque or bank draft or electronic clearing system through a bank account or prescribed electronic modes, no deduction shall be allowed for such expenditure.

However, where payment is made for plying, hiring, or leasing goods carriages, the ceiling of Rs. 35,000 shall be considered instead of Rs. 10,000.

The provision of Section 40A(3) does not apply to payments made by commission agents for goods received by them for sale on a commission or consignment basis because such payment is not an expenditure deductible in computing the taxable income of the commission agent.

However, if the commission agent purchases goods on his own account and not on a commission basis, the requirement of payment in a specified mode applies to such purchases.

Further, where the taxpayer had claimed a deduction in respect of expenditure in any of the earlier years and subsequently makes payment thereof, otherwise than by an account payee cheque or bank draft, in excess of Rs. 10,000, in that situation, the payment so made is deemed to be the business income of the previous year in which payment is made.

Exceptions:

The disallowance does not apply if payment is made in certain circumstances as prescribed in Rule 6DD. These circumstances are prescribed below:

A. Payment to Specified Institutions –

No disallowance shall be made for the payment made in a non-specified mode (i.e., cash, crossed cheque, bearer cheque, etc.) to the following institutions:

(a) RBI or any banking company, (b) State Bank of India or any of its subsidiary banks, (c) Co-op. banks or land mortgage bank, (d) Primary Agricultural Credit Society or Primary Credit Society, (e) LIC

B. Payment in Legal Tender to the Government

No disallowance shall be made for an expenditure whose payment is required to be made to the Government in legal tender, such as payment of freight charges/booking of wagons to railways, sales tax, excise duty, etc.

C. Payment by Specified Modes

No disallowance shall be made where the payment is made by the following modes:

(a) Letter of credit arrangements through a bank, (b) Mail or telegraphic transfer through a bank, (c) Book adjustment from one bank account to another bank account, (d) Bill of exchange payable only to a bank.

Here bank includes a bank established outside India also.

D. Payment by Book Adjustment

No disallowance shall be made for the payment made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to him.

E. Payment for Agriculture or Animal Produce

No disallowance shall be made for payment made to the cultivator, grower, or producer in respect of the following purchases:

(a) Agriculture or forest produce, (b) Produce of animal husbandry (including, livestock, meat, hides, and skins) or dairy or poultry farming, (c) Fish or fish products, (d) Products of horticulture or apiculture (bee-keeping for sale of honey)

The immunity from disallowance under this provision shall be available to the payer if payment for animal husbandry is made to a person who is the producer of these goods. If these goods are purchased from a trader, broker, or any other middleman, this exception shall not available.

F. Payment for Produce of Cottage Industry

No disallowance shall be made where the payment is made to a producer for the purchase of the products manufactured or processed without the aid of power in a cottage industry.

G. Payment in Remote Places

No disallowance shall be made for the cash payment if payment is made in a village or town, to any person who ordinarily resides or carries any business, profession, or vocation, in such village or town which, on the date of such payment, is not served by the bank.

H. Terminal payments to low-paid employees

No disallowance shall be made for any payment made by the employer by way of gratuity, retrenchment compensation, or similar terminal benefits to an employee (or to his heirs) on or in connection with the retirement, retrenchment, resignation, discharge, or death of such employee. Such immunity is allowed if the aggregate of such sum payable to the employee or his heir does not exceed Rs. 50,000.

I. Payment of salary at remote places

If an employee is temporarily posted for 15 days or more in a place other than his normal place of duty or on a ship and he does not maintain any bank account at such place or ship, the salary paid after deducting tax at source under section 192 by the employer to such employee shall not be disallowed.

J. Payment to the agent

Payments made in a non-specified mode shall not be disallowed if it is paid by any person to his agent who is required to make payment in cash for goods or services on his behalf.

K. Payment made by an authorized dealer

Authorized dealers and money changers are normally required to pay cash for purchases of foreign currency or ter’s cheques in the normal course of their business, and no disallowance shall be made for any cash payments made by them.

Authorized dealer or money changer means a person authorised as such to deal in foreign currency or foreign exchange under any law for the time being in force.

L. Purchase of Animal

Any person who buys animals from farmers to slaughter them and to sell their raw meat or carcasses, to meat processing factories, traders, or retail outlets, may be considered a producer of livestock and meat. This exemption shall be available to the payer subject to the fulfilment of following conditions:

a) The person receiving the payment files a declaration that he is a producer of meat;

b) The producer of meat declares that the payment, otherwise than through account payee cheque or bank draft, was made on his insistence; and

c) A veterinary doctor certifies that the person specified in the certificate is a producer of meat and that slaughtering was done under his supervision.

Acceptance of loans, deposits, and specified sum [Section 269SS]

Section 269SS restricts a person (recipient) from taking or accepting any loan or deposit or any specified sum from any other person (depositor), otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or other prescribed electronic mode (impermissible mode). However, restriction isn’t imposed if the recipient and depositor, both are having agriculture income and neither of them has any income chargeable to tax.

The following transactions are covered under section 269SS:

• Any loan or deposit of money; or
• Any sum of money receivable by way of advance or otherwise in relation to the transfer of immovable property, whether or not the transfer takes place.

The provision shall be attracted if:-

a) The amount (or aggregate) of such loan or deposit or specified sum from a depositor is Rs. 20,000 or more; or

b) On the date of taking or accepting such loan or deposit or specified sum, the amount (or the aggregate) of any loan or deposit or specified sum taken or accepted earlier from the depositor remaining unpaid is Rs. 20,000 or more; or

c) The aggregate of the sum referred to in points (a) and (b) above is Rs. 20,000 or more.

However, if a deposit is accepted by a Primary Agricultural Credit Society (PACS) or a Primary Co-Operative Agricultural and Rural Development Bank (PCARD) from its member or a loan is taken from a PACS or a PCARD by its member, the threshold of Rs. 20,000 shall be enhanced to Rs. 2 lakhs¹.

Exceptions – There is no restriction to take or accept any loan or deposit or specified sum from or by any of the following:

• Government;
• Any banking company, post office saving bank, or co-operative bank;
• Any corporation established by a Central, State, or Provincial Act;
• Any government company defined under section 2(45) of the Companies Act, 2013; or
• Any other notified institutions, associations, or body, or class of institutions, associations, or bodies.

Penalty for contravention of the provisions – Where a person takes or accepts any loan or deposit (or specified sum) in cash or in a mode which is in contravention of Section 269SS, he shall be liable for a penalty under Section 271D of a sum equal to the amount of the loan or deposit (or specified sum) so taken or accepted.

Mode of undertaking transactions [Section 269ST]

Section 269ST restricts a person (recipient) from receiving an amount of Rs. 2 lakhs or more otherwise than by an account payee cheque or account payee bank draft or use of an electronic clearing system through a bank account or other prescribed electronic modes.

This provision imposes restrictions in respect of the receipts of Rs. 2 lakhs or more:

a) In aggregate from a person in a day; or

b) In respect of a single transaction; or

For Example, Mr. A has sold goods worth Rs. 2.5 lakhs to Mr. B who has paid in cash as follows:

○ Rs. 1.5 lakhs on April 1;

○ Rs. 25,000 on May 1; and

○ Rs. 75,000 on June 1.

Mr. A would be considered to have not complied with the provisions of Section 269ST the moment he receives the last payment of Rs. 75,000 which eventually makes the total receipt in respect of a transaction exceeding Rs. 200,000.

c) In respect of a transaction relating to one event or occasion from a person – if there are multiple transactions, relating to one event or occasion from a person they would be covered under the restriction.

Where a transaction is covered within the scope of Section 269SS (accepting loan or deposit in impermissible mode) provisions of this section shall not apply.

Exceptions – This provision shall not apply to the receipt by the following persons:

• Government;
• Any banking company, post office saving bank, or co-operative bank; or
• Any other notified persons, class of persons, or receipts.

Further, the provision of this section shall not apply to receipt by any person from any banking company, post office savings bank, or co-operative bank.

Penalty for contravention of the provisions – Where a person receives the amount in contravention of this provision, he shall be liable for a penalty under Section 271DA of a sum equal to the amount of such receipts.

Acceptance of payment through prescribed electronic modes [Section 269SU]

Section 269SU provides that where a person is carrying on a business and his total sales, turnover, or gross receipts during the immediately preceding previous year exceeds Rs. 50 crores, it shall be mandatory for him to provide a facility to accept the payment through the following electronic modes:

a) Debit card powered by RuPay;

b) Unified Payments Interface (UPI) (BHIM-UPI); and

c) Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code).

These facilities to accept the payment shall be in addition to the facility for other electronic modes of payment being provided by such person.

The provision of this section shall not apply to a person having only B2B transactions (i.e., no transaction with retail customer/consumer) subject to the condition that at least 95% of the aggregate of all amounts received during the previous year, including the amount received for sales, turnover or gross receipts, is by any mode other than cash.

Penalty for contravention of the provisions – Where a person fails to provide the facility for accepting payment through prescribed electronic modes as required under this provision, he shall be liable for a penalty under Section 271DB of Rs. 5,000 for every day during which such failure continues.

Mode of repayment of certain loans or deposits [Section 269T]

Section 269T restricts a person from repayment of any loan, deposit, or any specified advance received by it otherwise than by an account payee cheque or account payee bank draft (drawn in the name of the person who made the loan, deposit or specified advance) or by use of electronic clearing system through a bank account or other prescribed electronic modes.

Repayment in respect of the following transactions are covered under this provision:

• Any loan or deposit of money which is repayable after notice or repayable after a period and in case of a person other than company it includes loan or deposit of any nature; or
• Any sum of money in the nature of advance in relation to the transfer of immovable property, whether or not the transfer takes place.

Such loan, deposit, or specified sum should be taken or accepted in accordance with provisions of Section 269ST. In case of cash repayment of loan or deposit, the borrower could be penalized under Section 269T and the recipient could be penalized under Section 269ST.

This provision shall be attracted if the value of the covered transaction exceeds the following limit:

a) The amount of such loan or deposit or specified advance together with the interest payable thereon is Rs. 20,000 or more;

b) The aggregate amount of the loans or deposits held either in own name or jointly with any other person on the date of such repayment together with the interest payable on such loans or deposits is Rs. 20,000 or more; or

c) The aggregate amount of the specified advances received by such person either in his own name or jointly with any other person on the date of such repayment together with the interest payable on such specified advances is Rs. 20,000 or more.

However, if a deposit is paid by a Primary Agricultural Credit Society (PACS) or a Primary Co-Operative Agricultural and Rural Development Bank (PCARD) to its member or a loan is repaid to a PACS or a PCARD by its member, the threshold of Rs. 20,000 shall be enhanced to Rs. 2 lakhs².

Exceptions– There is no restriction on repayment of any loan or deposit or specified advance taken or accepted from any of the following:

• Government;
• Any banking company, post office saving bank, or co-operative bank;
• Any corporation established by a Central, State, or Provincial Act;
• Any government company defined under section 2(45) of the Companies Act, 2013; or
• Any other notified institutions, associations, or body, or class of institutions, associations, or bodies.

Penalty for contravention of the provisions – Where a person repays any loan or deposit (including interest) or specified advance in cash or an impermissible mode in contravention of provisions of Section 269T, he shall be liable for a penalty under 271E of a sum equal to loan or deposit or specified advance so repaid.

Overview of Section 269SS, 269ST , 269SU and 269T :

Section	Covered Transaction	Threshold Limit	Consequences of Default
269SS	Taking or accepting any loan or deposit or specified sum	Rs. 20,000 or more	Penalty under Section 271D (100% of loan or deposit so taken or accepted)
269ST	Receipt of any amount	Rs. 2 lakhs or more	Penalty under Section 271DA (100% of the amount so received)
269SU	Facility to be provided for accepting payment through prescribed electronic modes	Total sales/turnover/gross receipts exceed Rs. 50 crore during the immediately preceding previous year	Penalty under Section 271DB (Rs. 5,000 per day during which the default continues).
269T	Repayment of any loan or deposit or specified advance	Rs. 20,000 or more	Penalty under Section 271E (100% of loan or deposit so repaid)

Here for the above sections including section 40A(3) prescribed electronic modes include-

(a) Credit Card; (b) Debit Card; (c) Net Banking; (d) IMPS (Immediate Payment Service); (e) UPI (Unified Payment Interface); (f) RTGS (Real Time Gross Settlement); (g) NEFT (National Electronic Funds Transfer), and (h) BHIM (Bharat Interface for Money) Aadhaar Pay.

MCQs on the prohibited transaction in cash/limit on cash transactions

Q1. Deduction for expenditure is not allowed under section 40A(3), where the cash payment is made to a person in a day exceeds Rs. ________.

(a) 10,000

(b) 15,000

(c) 20,000

(d) No limit

Correct answer: (a)

Justification for correct answer: If the payment (or aggregate of payments) for an expenditure to a person in a day exceeds Rs. 10,000 and it is made by any mode other than account payee cheque or bank draft or electronic clearing system through a bank account or prescribed electronic modes, no deduction shall be allowed for such expenditure under section 40A(3).

Q2. What is the ceiling limit under section 40A(3) where payment is made for plying, hiring, or leasing goods carriages?

(a) 10,000

(b) 15,000

(c) 20,000

(d) 35,000

Correct Answer: (d)

Justification for correct answer: Where payment is made for plying, hiring, or leasing goods carriages, the ceiling of Rs. 35,000 shall be considered instead of Rs. 10,000.

Q3. Section 40A(3) shall not be applied where payment is made to ________.

(a) RBI

(b) SBI

(c) LIC

(d) All of the above

Correct Answer: (d)

Justification for correct answer: No disallowance shall be made under section 40A(3) for the payment made in a non-specified mode (i.e., cash, crossed cheque, bearer cheque, etc.) to (a) RBI or any banking company, (b) State Bank of India or any of its subsidiary banks, (c) Co-op. banks or land mortgage bank, (d) Primary Agricultural Credit Society or Primary Credit Society, (e) LIC

Q4. Which transactions are covered in the ambit of section 269SS ?

(a) Any loan or deposit of money

(b) Any sum of money receivable by way of advance to the transfer of immovable property

(c) Both (a) and (b)

(d) None of the above

Correct Answer: (c)

Justification for correct answer: The following transactions are covered under the provision of section 269SS – (a) Any loan or deposit of money; or (b) Any sum of money receivable by way of advance or otherwise in relation to the transfer of immovable property, whether or not the transfer takes place.

Q5. What is the penalty for contravention of the provision of Section 269SS?

(a) Rs. 5,000 per day

(b) a sum equal to the amount of the loan or deposit (or specified sum) so taken or accepted

(c) Rs. 1,00,000

(d) None of the above

Correct Answer: (b)

Justification for correct answer: Where a person takes or accepts any loan or deposit (or specified sum) in cash or in a mode which is in contravention of Section 269SS, he shall be liable for a penalty under Section 271D of a sum equal to the amount of the loan or deposit (or specified sum) so taken or accepted.

Q6. Provision of section 269SS is not applied where loan or deposit is taken or accepted from ________.

(a) Government

(b) Any banking company

(c) Co-operative bank

(d) All of the above

Correct Answer: (d)

Justification for correct answer: There is no restriction under section 269SS to take or accept any loan or deposit or specified sum from or by – (a) Government; (b) Any banking company, post office saving bank, or co-operative bank; (c) Any corporation established by a Central, State, or Provincial Act; (d) Any government company defined under section 2(45) of the Companies Act, 2013; or (e) Any other notified institutions, associations, or body, or class of institutions, associations, or bodies.

Q7. Provision of section 269ST imposes restrictions in respect of the receipts of Rs. 2 lakhs or more ________.

(a) In aggregate from a person in a day

(b) In respect of a single transaction

(c) In respect of a transaction relating to one event or occasion from a person

(d) All of the above

Correct Answer: (d)

Justification for correct answer: Provision of section 269ST imposes restrictions in respect of the receipts of Rs. 2 lakhs or more:

• In aggregate from a person in a day; or
• In respect of a single transaction; or
• In respect of a transaction relating to one event or occasion from a person.

Q8. What is the penalty for contravention of the provision of Section 269ST?

(a) Rs. 5,000 per day

(b) a sum equal to the amount of such receipts

(c) Rs. 1,00,000

(d) None of the above

Correct Answer: (b)

Justification for correct answer: Where a person receives the amount in contravention of provision of section 269ST, he shall be liable for a penalty under Section 271DA of a sum equal to the amount of such receipts.

Q9. Which of the following facility to accept the payment is mandatorily required under Section 269SU?

(a) Debit card powered by RuPay

(b) BHIM-UPI

(c) BHIM-UPI-QR Code

(d) All of the above

Correct Answer: (d)

Justification for correct answer: Section 269SU provides that where a person is carrying on a business and his total sales, turnover, or gross receipts during the immediately preceding previous year exceeds Rs. 50 crores, it shall be mandatory for him to provide a facility to accept the payment through the following electronic modes:

• Debit card powered by RuPay;
• Unified Payments Interface (UPI) (BHIM-UPI); and
• Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code).

Q10. What is the penalty for contravention of the provision of Section 269SU?

(a) Rs. 5,000 per day

(b) Rs. 50,000

(c) Rs. 1,00,000

(d) None of the above

Correct Answer: (a)

Justification for correct answer: Where a person fails to provide the facility for accepting payment through prescribed electronic modes as required under this section 269SU, he shall be liable for a penalty under Section 271DB of Rs. 5,000 for every day during which such failure continues.

Q11. What is the penalty for contravention of the provision of Section 269T?

(a) Rs. 5,000 per day

(b) a sum equal to loan or deposit so repaid

(c) Rs. 1,00,000

(d) None of the above

Correct Answer: (b)

Justification for correct answer: Where a person repays any loan or deposit (including interest) or specified advance in cash or an impermissible mode in contravention of provisions of Section 269T, he shall be liable for a penalty under 271E of a sum equal to loan or deposit or specified advance so repaid.

Q12. Which of the following is covered under the prescribed electronic modes for Section 40A(3)?

(a) UPI

(b) IMPS

(c) Net-banking

(d) All of the above

Correct Answer: (d)

Justification for correct answer: prescribed electronic modes include – (a) Credit Card; (b) Debit Card; (c) Net Banking; (d) IMPS (Immediate Payment Service); (e) UPI (Unified Payment Interface); (f) RTGS (Real Time Gross Settlement); (g) NEFT (National Electronic Funds Transfer), and (h) BHIM (Bharat Interface for Money) Aadhaar Pay.

Notes:

¹ Inserted by the Finance Act, 2023 with effect from 01.04.2023.

² Inserted by the Finance Act, 2023 with effect from 01.04.2023.

Tax on presumptive basis in case of certain businesses

To give relief to small taxpayers from the tedious job of maintenance of books of account and from getting the accounts audited, the Income-tax Act has framed the presumptive taxation scheme under sections 44AD, section 44ADA and section 44AE. In this part you can gain knowledge about various provisions of the presumptive taxation scheme of section 44AD, section 44ADA and section 44AE.

Meaning of presumptive taxation scheme

As per the Income-tax Act, a person engaged in business or profession is required to maintain regular books of account and further, he has to get his accounts audited. To give relief to small taxpayers from this tedious work, the Income-tax Act has framed the presumptive taxation scheme under sections 44AD, section 44ADA and section 44AE.

A person adopting the presumptive taxation scheme can declare income at a prescribed rate and, in turn, is relieved from tedious job of maintenance of books of account and also from getting the accounts audited.

Meaning of presumptive taxation scheme

For small taxpayers the Income-tax Act has framed three presumptive taxation schemes as given below:

1) The presumptive taxation scheme of section 44AD.

2) The presumptive taxation scheme of section 44ADA.

3) The presumptive taxation scheme of section 44AE.

Presumptive Taxation Scheme of Section 44AD

For whom the presumptive taxation scheme of section 44AD is designed?

The presumptive taxation scheme of section 44AD is designed to give relief to small taxpayers engaged in any business (except the business of plying, hiring or leasing of goods carriages referred to in section 44AE).

The presumptive taxation scheme of section 44AD can be adopted by following persons :

1) Resident Individual

2) Resident Hindu Undivided Family

3) Resident Partnership Firm (not Limited Liability Partnership Firm)

In other words, the scheme cannot be adopted by a non-resident and by any person other than an individual, a HUF or a partnership firm (not Limited Liability Partnership Firm).

This scheme cannot be adopted by a person who has made any claim towards deductions under section 10A/10AA/10B/10BA or under sections 80HH to 80RRB in the relevant year.

Businesses not covered under the presumptive taxation scheme of section 44AD

The scheme of section 44AD is designed to give relief to small taxpayers engaged in any business, except the following businesses:

♦ Business of plying, hiring or leasing of goods carriages referred to in section 44AE.

♦ A person who is carrying on any agency business.

♦ A person who is earning income in the nature of commission or brokerage

Apart from above discussed businesses, a person carrying on profession as referred to in section 44AA(1) is not eligible for presumptive taxation scheme.

An insurance agent cannot adopt the presumptive taxation scheme of section 44AD

A person who is earning income in the nature of commission or brokerage cannot adopt the presumptive taxation scheme of section 44AD. Insurance agents earn income by way of commission and, hence, they cannot adopt the presumptive taxation scheme of section 44AD.

A person engaged in a profession as prescribed under section 44AA(1) cannot adopt the presumptive taxation scheme of section 44AD

A person who is engaged in any profession as prescribed under section 44AA(1) cannot adopt the presumptive taxation scheme of section 44AD.

A person whose total turnover or gross receipts for the year exceed Rs. 2,00,00,000 cannot adopt the presumptive taxation scheme of section 44AD

The presumptive taxation scheme of section 44AD can be opted by the eligible persons, if the total turnover or gross receipts from the business do not exceed Rs. 2,00,00,000. In other words, if the total turnover or gross receipt of the business exceeds Rs. 2,00,00,000 then the scheme of section 44AD cannot be adopted.

However, if the amount of cash received during the previous year does not exceed 5% of the total turnover or gross receipt of such year then the threshold limit for total turnover or gross receipt shall be taken as Rs. 3,00,00,000 instead of Rs. 2,00,00,000. The receipts through the mode of cheque or a bank draft which is not an account payee, shall be considered a receipt in cash for this purpose. [Applicable w.e.f. Assessment Year 2024-25]

Manner of computation of taxable business income under the normal provisions of the Income-tax Act, i.e., in case of a person not adopting the presumptive taxation scheme of section 44AD

Generally, as per the Income-tax Act, the taxable business income of every person is computed as follows:

Particulars	Amount
Turnover or gross receipts from the business	XXXXX
Less : Expenses incurred in relation to earning of the income	(XXXXX)
Taxable Business Income	XXXXX

Manner of computation of taxable business income under the normal provisions of the Income-tax Act, i.e., in case of a person not adopting the presumptive taxation scheme of section 44AD

For the purpose of computing taxable business income in the above manner, the taxpayers have to maintain books of account of the business. Income will be computed on the basis of the information revealed in the books of account.

The manner of computation of taxable business income in case of a person adopting the presumptive taxation scheme of section 44AD

In case of a person adopting the provisions of section 44AD, income is computed on presumptive basis at the rate of 8% of the turnover or gross receipts of the eligible business for the year.

In order to promote digital transactions and to encourage small unorganized business to accept digital payments, section 44AD is amended with effect from the assessment year 2017-18 to provide that income shall be computed at the rate of 6% instead of 8% if turnover/gross receipt is received by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed during the previous year or before the due date of filing of return under section 139(1).

Hence, in case of a person adopting the provisions of section 44AD, income will not be computed in normal manner as discussed earlier (i.e., Turnover less Expenses) but will be computed @ 6% or 8%, as the case may be, of the turnover or gross receipt.

However, a person may voluntarily disclose his business income at more than 8% or 6%, as the case may be, of turnover or gross receipt.

The presumptive income computed as per the prescribed rate is the final income and no further expenses will be allowed or disallowed

Under the normal provisions of the Income-tax Act, taxable business income will be computed after allowing deduction in respect of expenses which are deductible as per the Income-tax Act and after disallowing expenses which are not deductible as per the Income-tax Act.

In case of a person who is opting for the presumptive taxation scheme of section 44AD, the provisions of allowance/disallowances as provided for under the Income-tax Act will not apply and income computed at the presumptive rate of 6% or 8% will be the final taxable income of the business covered under the presumptive taxation scheme. In other words, the income computed as per the prescribed rate will be the final taxable income of the business covered under the presumptive taxation scheme and no further expenses will be allowed or disallowed.

While computing income as per the provisions of section 44AD, separate deduction on account of depreciation is not available. However, the written down value of any asset used in such business shall be calculated as if depreciation as per section 32 is claimed and has been actually allowed.

No need to maintain books of account as prescribed under section 44AA

Section 44AA deals with provisions relating to maintenance of books of account by a person engaged in business/profession. Thus, a person engaged in business/profession has to maintain books of account of his business/profession according to the provisions of section 44AA.

In case of a person engaged in a business and opting for the presumptive taxation scheme of section 44AD, the provisions of section 44AA relating to maintenance of books of account will not apply. In other words, if a person adopts the provisions of section 44AD and declares income @ 6% or 8% (as the case may be) of the turnover, then he is not required to maintain the books of account as provided for under section 44AA in respect of business covered under the presumptive taxation scheme of section 44AD.

Payment of advance tax in respect of income from business covered under section 44AD

Any person opting for the presumptive taxation scheme under section 44AD is liable to pay whole amount of advance tax on or before 15thMarch of the previous year. If he fails to pay the advance tax by 15th March of previous year, he shall be liable to pay interest as per section 234C.

Note: Any amount paid by way of advance tax on or before 31st day of March shall also be treated as advance tax paid during the financial year ending on that day.

Tax audit under section 44AB not applicable if a person opts the presumptive taxation scheme of section 44AD

If an assessee is opting for the presumptive tax scheme of Section 44AD, the tax audit under section 44AB shall not be required in the case of such assessees.

Consequences if a person opts out from the presumptive taxation scheme of section 44AD

If a person opts for presumptive taxation scheme then he is also require to follow the same scheme for next 5 years. If he failed to do so, then presumptive taxation scheme will not be available for him for next 5 years. [For example, an assessee claims to be taxed on presumptive basis under Section 44AD for 2023-24. However, for AY 2024-25, if he did not opt for presumptive taxation Scheme. In this case, he will not be eligible to claim benefit of presumptive taxation scheme for next five AYs, i.e. from AY 2025-26 to 2029-30.]

Further, he is required to keep and maintain books of account and he is also liable for tax audit as per section 44AB from the AY in which he opts out from the presumptive taxation scheme. [If his total income exceeds maximum amount not chargeable to tax]

Presumptive Taxation Scheme of Section 44ADA For whom the presumptive taxation scheme of section 44ADA is designed?

The presumptive taxation scheme of section 44ADA is designed to give relief to small taxpayers engaged in specified profession.

Eligible persons who can take advantage of the presumptive taxation scheme of section 44ADA

A person resident in India engaged in following professions can take advantage of presumptive taxation scheme of section 44ADA:-

1) Legal

2) Medical

3) Engineering or architectural

4) Accountancy

5) Technical consultancy

6) Interior decoration

7) Any other profession as notified by CBDT

The Finance Act, 2021 has amended provisions of section 44ADA to define eligible assessee.

W.e.f. Assessment Year 2021-22, the benefit of section 44ADA is eligible only in case of assessee who is an:

a) Individual; and

b) Partnership firm other than a Limited Liability Partnership as defined under clause (n) of sub-section (1) of section 2 of Limited Liability Partnership Act, 2008.

A eligible person whose total gross receipts for the year exceed Rs. 50,00,000 cannot adopt the presumptive taxation scheme of section 44ADA

The presumptive taxation scheme of section 44ADA can be opted by the eligible persons, if the total gross receipts from the profession do not exceed Rs. 50,00,000. In other words, if the total gross receipt of the profession exceeds Rs. 50,00,000 then the scheme of section 44ADA cannot be adopted.

However, if the amount of cash received during the previous year does not exceed 5% of the total gross receipt of such year then the threshold limit for total gross receipt shall be taken as Rs. 75,00,000 instead of Rs. 50,00,000. The receipts through the mode of cheque or a bank draft which is not an account payee, shall be considered a receipt in cash for this purpose. [Applicable w.e.f. Assessment Year 2024-25]

Manner of computation of taxable income in case of a person adopting the presumptive taxation scheme of section 44ADA

In case of a person adopting the provisions of section 44ADA, income will be computed on presumptive basis, i.e. @ 50% of the total gross receipts of the profession. However such person can declare income higher than 50%.

In other words, in case of a person adopting the provisions of section 44ADA, income will not be computed in normal manner but will be computed @50% of the gross receipts.

The presumptive income computed @ 50% is the final income and no further expenses will be allowed

A person who adopts the presumptive taxation scheme is deemed to have claimed all deduction of expenses. Any further claim of deduction is not allowed after declaring profit @ 50%.

While computing income as per the provisions of section 44ADA, separate deduction on account of depreciation is not available. However, the written down value of any asset used in such business shall be calculated as if depreciation as per section 32 is claimed and has been actually allowed.

Payment of advance tax in respect of income from professions covered under section 44ADA

Any person opting for the presumptive taxation scheme under section 44ADA is liable to pay whole amount of advance tax on or before 15th March of the previous year. If he fails to pay the advance tax by 15th March of previous year, he shall be liable to pay interest as per section 234C.

Maintenance of books of account if a person opts for presumptive taxation scheme of section 44ADA

In case of a person engaged in a specified profession as referred in section 44AA(1) and opts for presumptive taxation scheme of section 44ADA, the provision of section 44AA relating to maintenance of books of account will not apply. In other words, if a person opt for the provisions of section 44ADA and declares income @50% of the gross receipts, then he is not required to maintain the books of account in respect of specified profession.

Tax audit under section 44AB not applicable if a person opts the presumptive taxation scheme of section 44ADA

If an assessee is opting for the presumptive tax scheme of Section 44ADA, the tax audit under section 44AB shall not be required in the case of such assessees.

Provisions to be applied if a person does not opt for the presumptive taxation scheme of section 44ADA and declares his income from profession at lower rate (i.e. less than 50%)

A person can declare income at lower rate (i.e. less than 50%), however, if he does so, and his income exceeds the maximum amount which is not chargeable to tax, then he is required to maintain the books of account as per the provisions of section 44AA and has to get his accounts audited as per section 44AB.

Presumptive Taxation Scheme of Section 44AE Applicability of the presumptive taxation scheme of section 44AE

The scheme of section 44AE is designed to give relief to small taxpayers engaged in the business of plying, hiring or leasing of goods carriages.

Eligible taxpayer and eligible business for the purpose of the presumptive taxation scheme of section 44AE

The provisions of section 44AE are applicable to every person (i.e., an individual, HUF, firm, company, etc.).

The presumptive taxation scheme of section 44AE can be adopted by a person who is engaged in the business of plying, hiring or leasing of goods carriages and who does not own more than 10 goods vehicles at any time during the year.

A person who owns more than 10 goods vehicles cannot adopt the presumptive taxation scheme of section 44AE

The presumptive taxation scheme of section 44AE can be adopted by a person who is engaged in the business of plying, hiring or leasing of goods carriages and who does not own more than 10 goods vehicles at any time during the year.

The important criterion of the scheme is the restriction on owning of not more than 10 goods vehicles at any time during the year. Thus, if a person owns more than 10 goods vehicles at any time during the year, then he cannot take advantage of this scheme.

The manner of computation of taxable business income in case of a person adopting the presumptive taxation scheme of section 44AE

In case of a person who is willing to opt for the presumptive taxation scheme of section 44AE, income will be computed on an estimated basis.

For Heavy Goods Vehicle, income will be computed at the rate of Rs. 1,000 per ton of gross vehicle weight for every month or part of a month during which the heavy goods vehicle is owned by taxpayer. In case of vehicles other than heavy goods vehicle, income will be computed at the rate of 7,500 for every month or part of a month during which the goods carriage is owned by taxpayer. Part of the month would be considered as full month.

Note 1 : If the actual income is higher than the presumptive rate, i.e., higher than Rs. 1,000/Rs. 7,500, then such higher income can be declared.

Note 2 : “Heavy Goods Vehicle” means any goods carriage having gross vehicle weight exceeding 12,000 kilograms.

Illustration

Mr. Khush is engaged in the business of plying, hiring or leasing of goods carriage. Throughout the year 2025-26 he owned 9 goods vehicles (other than heavy goods vehicles). What will be the taxable income from the business of plying, hiring or leasing of goods carriages if he adopts the provisions of section 44AE?

**

As per the provisions of section 44AE, for Heavy Goods Vehicle, income will be computed at the rate of Rs. 1,000 per ton of gross vehicle weight for every month or part of a month during which the heavy goods vehicle is owned by taxpayer. In case of vehicles other than heavy goods vehicle, income will be computed at the rate of 7,500 for every month or part of a month during which the goods carriage is owned by taxpayer.

In the present case, Mr. Khush owned 9 goods vehicles (other than heavy goods vehicles) throughout the year and, hence, income will be computed as follows:

Particulars	Amount (Rs.)
Income per month per goods vehicle	7,500
(×) No. of goods vehicles	9
Monthly income as per the provisions of section 44AE from 9 goods vehicles	67,500
(×) No. of months in the year during which the vehicles were owned	12
Total income from business of plying, hiring or leasing goods carriages as per the provisions of section 44AE	8,10,000

Illustration

Mr. Sunil engaged in the business of plying, hiring or leasing goods carriages. He owned 5 heavy goods vehicle having gross weight of 13,000 kilograms and 4 other goods vehicle during the previous year 2025-26. What will be his taxable income as per the provisions of section 44AE?

**

As per the provisions of section 44AE, for Heavy Goods Vehicle, income will be computed at the rate of Rs. 1,000 per ton of gross vehicle weight for every month or part of a month during which the heavy goods vehicle is owned by taxpayer. In case of vehicles other than heavy goods vehicle, income will be computed at the rate of 7,500 for every month or part of a month during which the goods carriage is owned by taxpayer.

In the present case, Mr. Sunil owned total 9 goods vehicles in which 5 are heavy goods vehicles having gross weight of 13,000 Kilograms. Hence, income will be computed as follows:

Particulars	Rs.
Income per month per heavy goods vehicle ( 13,000 kilograms i.e., 13 ton)	1,000 × 13
(x) No. of heavy goods vehicle	5
Monthly income in case of heavy goods vehicle as per the provisions of section 44AE	65,000
(x) No. of months in a year	12
Total income as per the provisions of section 44AE from heavy goods vehicle (A)	7,80,000
Income per month per goods vehicle (other than heavy vehicle)	7,500
(x) No. of vehicles other than heavy goods vehicle	4
Monthly income as in case of vehicles other than heavy goods vehicle as per the provisions of section 44AE	30,000
(*) No. of months in a year	12
Total income as per the provisions of section 44AE from vehicles other than heavy goods vehicle (B)	3,60,000
Total income from business of plying, hiring or leasing goods carriages as per the provisions of section 44AE (A+B)	11,40,000

The presumptive income computed at the rate of Rs. 1,000 per ton or Rs. 7,500 per goods vehicle per month is the final income and no further expenses will be allowed or disallowed

Under the normal provisions of the Income-tax Act, taxable business income will be computed after allowing deduction in respect of expenses which are deductible as per the Income-tax Act and after disallowing expenses which are not deductible as per the Income-tax Act.

In case of a person who is opting for the presumptive taxation scheme of section 44AE, the provisions of allowance/disallowances as provided for under the Income-tax Act, will not apply and income computed at the presumptive rate of Rs. 1,000/Rs. 7,500 will be the final income. In other words, the income computed at the rate of Rs. 1,000/Rs. 7,500 per goods vehicle per month will be the final taxable income of the business and no further expenses will be allowed or disallowed.

However, in case of a taxpayer, being a partnership firm, opting for the presumptive taxation scheme, from the income computed at the presumptive rate of Rs. 7,500 per goods vehicle per month, further deduction can be claimed on account of remuneration and interest paid to partners (computed as per the Income-tax Act).

While computing income as per the provisions of section 44AE, separate deduction on account of depreciation is not available, however, the written down value of any asset used in such business shall be calculated as if depreciation as per section 32 is claimed and has been actually allowed.

No need to maintain books of account as prescribed under section 44AA

Section 44AA of the Income-tax Act, 1961 has provisions relating to maintenance of books of account by a person engaged in business/profession. Thus, a person engaged in business/profession has to maintain books of account of his business/profession according to the provisions of section 44AA.

However, a person opting for the presumptive taxation scheme of section 44AE, the provisions of section 44AA relating to maintenance of books of account will not apply. In other words, if a person adopts the provisions of section 44AE and declares his income at the rate of Rs. 7,500 per goods vehicle per month, then he is not required to maintain the books of account as provided for under section 44AA in respect of business covered under the presumptive taxation scheme of section 44AE.

Applicability of the provisions relating to payment of advance tax

There is no concession as regards payment of advance tax in case of a person who adopts the presumptive taxation scheme of section 44AE and, hence, he will be liable to pay advance tax even if he adopts the presumptive taxation scheme of section 44AE.

Provisions to be applied if a person does not opt for the presumptive taxation scheme of section 44AE and declares income at a lower rate, i.e., at less than Rs. 1,000 per ton or Rs. 7,500 per goods vehicle per month

A person can declare his income at lower rate (i.e., at less than Rs. 1,000 per ton or Rs. 7,500 per goods vehicle per month). However, if he does so, then he is required to maintain the books of account as per the provisions of section 44AA and has to get his accounts audited under section 44AB.

MCQ ON TAX ON PRESUMPTIVE BASIS IN CASE OF CERTAIN ELIGIBLE BUSINESSES

Q1. The presumptive taxation scheme of section 44AD is designed to give relief to small taxpayers engaged in any business including the business of plying, hiring or leasing of goods carriages.

(a) True (b) False

Correct answer : (b)

Justification of correct answer :

The presumptive taxation scheme of section 44AD is designed to give relief to small taxpayers engaged in any business except the business of plying, hiring or leasing of goods carriages referred to in section 44AE.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q2. The presumptive taxation scheme of section 44AD cannot be adopted by ____________.

(a) Resident Individual (b) Resident HUF

(c) Resident Partnership Firm (d) Limited Liability Partnership Firm

Correct answer : (d)

Justification of correct answer :

The presumptive taxation scheme of section 44AD can be adopted by following persons:

1) Resident Individual

2) Resident Hindu Undivided Family

3) Resident Partnership Firm (not Limited Liability Partnership Firm)

Thus, option (d) is the correct option.

Q3. A person who is carrying on any agency business and a person who is earning income in the nature of commission or brokerage cannot adopt the provisions of section 44AD.

(a) True (b) False

Correct answer : (a)

Justification of correct answer :

The scheme of section 44AD is designed to give relief to small taxpayers engaged in any business, except the following businesses:

♦ Business of plying, hiring or leasing of goods carriages referred to in section 44AE.

♦ A person who is carrying on any agency business.

♦ A person who is earning income in the nature of commission or brokerage

Thus, the statement given in the question is true and hence, option (a) is the correct option.

Q4. In case of a person adopting the provisions of section 44AD, income will be computed on presumptive basis, i.e., @____________ of the turnover or gross receipts of the eligible business for the year if turnover/gross receipt is received by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed during the previous year or before the due date of filing of return under section 139(1).

(a) 2% (b) 6%

(c) 8% (d) 10%

Correct Answer: (b)

Justification of correct answer:

In case of a person adopting the provisions of section 44AD, income is computed on presumptive basis at the rate of 8% of the turnover or gross receipts of the eligible business for the year.

However, in order to promote digital transactions and to encourage small unorganized business to accept digital payments, section 44AD is amended with effect from the assessment year 2017- 18 to provide that income shall be computed at the rate of 6% instead of 8% if turnover/gross receipt is received by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed during the previous year or before the due date of filing of return under section 139(1).

Thus, option (b) is the correct option.

Q5. While computing income as per the provisions of section 44AD, separate deduction on account of depreciation is available.

(a) True (b) False

Correct answer : (b)

Justification of correct answer :

While computing income as per the provisions of section 44AD, separate deduction on account of depreciation is not available. However, the written down value of any asset used in such business shall be calculated as if depreciation as per section 32 is claimed and has been actually allowed.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q6. A person opting for the presumptive taxation scheme of section 44AD will ____________ to pay advance tax in respect of income from business covered under section 44AD.

(a) Be liable (b) Not be liable

Correct answer : (a)

Justification of correct answer :

Any person opting for the presumptive taxation scheme under section 44AD is liable to pay whole amount of advance tax on or before 15thMarch of the previous year. If he fails to pay the advance tax by 15th march of previous year, he shall be liable to pay interest as per section 234C.

Note: Any amount paid by way of advance tax on or before 31st day of March shall also be treated as advance tax paid during the financial year ending on that day.

Q7. The presumptive taxation scheme of section 44ADA is designed to give relief to small taxpayers engaged in any profession.

(a) True (b) False

Correct answer: (b)

Justification of correct answer:

The presumptive taxation scheme of section 44ADA is designed to give relief to small taxpayers engaged in specified profession (i.e., legal, medical, engineering or architectural, accountancy, technical consultancy, interior decoration or any other profession as notified by CBDT).

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q8. The presumptive taxation scheme of section 44ADA can be adopted by ____________.

(a) Resident Individual (b) Resident HUF

(c) Resident Partnership Firm (d) Resident LLP

Correct answer: (a) & (c)

Justification of correct answer:

w.e.f. Assessment Year 2021-22, the Finance Act, 2021 has restricted the benefit of section 44ADA only to a resident person being individual and partnership firm (other than LLP). Thus option (a) & (c)

Q9. In case of a person adopting the provisions of section 44ADA, income will be computed on presumptive basis, i.e., @ ____________ of gross receipts of the specified profession for the year.

(a) 2% (b) 5%

(c) 50% (d) 10%

Correct answer : (c)

In case of a person adopting the provisions of section 44ADA, income will be computed on presumptive basis, i.e. @ 50% of the total gross receipts of the profession. However such person can declare income higher than 50%.

In other words, in case of a person adopting the provisions of section 44ADA, income will not be computed in normal manner but will be computed @50% of the gross receipts.

Thus, option (c) is the correct option.

Q10. While computing income as per the provisions of section 44ADA, separate deduction on account of depreciation is available.

(a) True (b) False

Correct answer : (b)

Justification of correct answer :

A person who adopts the presumptive taxation scheme is deemed to have claimed all deduction of expenses. Any further claim of deduction is not allowed after declaring profit @ 50%. While computing income as per the provisions of section 44ADA, separate deduction on account of depreciation is not available. However, the written down value of any asset used in such business shall be calculated as if depreciation as per section 32 is claimed and has been actually allowed.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q11. A person opting for the presumptive taxation scheme of section 44ADA will____________ to pay advance tax in respect of income from business covered under section 44ADA.

(a) Be liable (b) Not be liable

Correct answer : (a)

Justification of correct answer :

Any person opting for the presumptive taxation scheme under section 44ADA is liable to pay whole amount of advance tax on or before 15th March of the previous year. If he fails to pay the advance tax by 15th March of previous year, he shall be liable to pay interest as per section 234C.

Thus, option (a) is the correct option.

Q12. The scheme of section 44AE is designed to give relief to small taxpayers engaged in the business of ____________.

(a) Plying, hiring or leasing of goods carriages (b) Provision store

(c) Medical store (d) Departmental store

Correct answer : (a)

Justification of correct answer :

The scheme of section 44AE is designed to give relief to small taxpayers engaged in the business of plying, hiring or leasing of goods carriages.

Thus, option (a) is the correct option.

Q13. The presumptive taxation scheme of section 44AE can be adopted by a person who is engaged in the business of plying, hiring or leasing of goods carriages and who does not own more than ____________ goods vehicles at any time during the year.

(a) 50 (b) 30

(c) 10 (d) 5

Correct answer : (c)

Justification of correct answer :

The presumptive taxation scheme of section 44AE can be adopted by a person who is engaged in the business of plying, hiring or leasing of goods carriages and who does not own more than 10 goods vehicles at any time during the year.

Thus, option (c) is the correct option.

Q14. In case of a person who is willing to opt for the presumptive taxation scheme of section 44AE, income will be computed @ Rs. 5,000 per month during which the goods vehicle is owned by him during the year and part of the month would be ignored.

(a) True (b) False

Correct answer : (b)

Justification of correct answer :

In case of a person who is willing to opt for the presumptive taxation scheme of section 44AE, for Heavy Goods Vehicle, income will be computed at the rate of Rs. 1,000 per ton of gross vehicle weight for every month or part of a month during which the heavy goods vehicle is owned by taxpayer. In case of vehicles other than heavy goods vehicle, income will be computed at the rate of 7,500 for every month or part of a month during which the goods carriage is owned by taxpayer. Part of the month would be considered as full month.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Q15. A partnership firm adopting the provisions of section 44AE can claim further deduction on account of remuneration and interest paid to partners (computed as per the Income-tax Act) from the income computed at the presumptive rate.

(a) True (b) False

Correct answer : (a)

Justification of correct answer :

In case of a taxpayer, being a partnership firm, opting for the presumptive taxation scheme, can claim further deduction on account of remuneration and interest paid to partners (computed as per the Income-tax Act) from the income computed at the presumptive rate.

Thus, the statement given in the question is true and hence, option (a) is the correct option.