Deductions which are allowed in computing income from profits and gains of business or profession

A number of other deductions under Section 36 of the Income-Tax Act are allowed while computing income from profits and gains of business or profession:

• S36 (i): The amount of any premium, paid in respect of insurance against risk of damage or destruction of stocks or stores, used for the purposes of the business or profession;
• (ia) The amount of any premium, paid by a federal milk co-operative society to effect or to keep in force an insurance on the life of the cattle owned by a member of a co-operative society, being a primary society engaged in supplying milk, raised by the members of such federal milk co-operative society;
• (ib) The amount of any premium, paid by cheque by the assessee as an employer to effect or to keep in force an insurance on the health of his employees under a scheme, framed in this behalf by the General Insurance Corporation of India, formed under section 9 of the General Insurance Business (Nationalization) Act, 1972 (57 of 1972) and approved by the Central Government;
• (ii) Any sum, paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission;
• (iii) The amount of the interest paid in respect of capital borrowed for acquisition of the asset from the date it is put to use for the purposes of the business or profession;
• (iv) Any sum, paid by the assessee as an employer by way of contribution towards a recognized provident fund or an approved Superannuation fund, subject to such limits as may be prescribed for the purpose of recognizing the provident fund or approving the Superannuation fund, as the case may be; and subject to such conditions as the Board may think fit to specify in cases where the contributions are not in the nature of annual contributions of fixed amounts or annual contributions, fixed on some definite basis by reference to the income chargeable under the head "Salaries" or to the contributions or to the number of members of the fund;
• (v) Any sum, paid by the assessee as an employer by way of contribution towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust;
• (va) Any sum, received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date.
• (vi) In respect of animals which have been used for the purposes of the business or profession, otherwise than as stock-in-trade and have died or become permanently useless for such purposes, the difference between the actual cost to the assessee of the animals and the amount, if any, realized in respect of the carcasses or animals;
• (vii) Subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year;
• (viia) in respect of any provision for bad and doubtful debts made by the following:
  • A scheduled bank or non -- scheduled bank, an amount not exceeding five per cent of the total income and an amount not exceeding ten per cent of the aggregate average advance made by the rural branches of such bank computed in the prescribed manner;
  • A bank, being a bank incorporated by or under the laws of a country outside India, an amount not exceeding five per cent of the total income;
  • public financial institution or a State financial corporation or a State industrial investment corporation, an amount not exceeding five per cent of the total income.
• (viii) In respect of any special reserve created by a financial corporation which is engaged in providing long term finance for industrial or agricultural development in India or, by a public company formed and registered in India with the main object of carrying on the business or providing long - term finance for construction or purchase of houses in India for residential purposes, an amount not exceeding forty per cent of the total income can be carried to the reserve account;
• (ix) Any bona fide expenditure incurred by a company for the purpose of promoting family planning amongst its employees;
• (x) Any sum, paid by a public financial institution by way of contribution towards any Exchange Risk Administration Fund, set up by public financial institutions, either jointly or separately.
• (xi) Any expenditure, incurred by the assessee on or after the 1st day of April 1999 but before the 1st day of April 2000, wholly and exclusively in respect of a non-Y2K compliant computer system, owned by the assessee and used for the purposes of his business or profession, so as to make such computer system Y2K compliant.
• (xii) Any expenditure (not being in the nature of capital expenditure) incurred by a corporation or a body corporate, by whatever name called, constituted or established by a Central, State or Provincial Act for the objects and purposes authorized by the Act, under which such corporation or body corporate was constituted or established.