Page 206 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Unit 11: Taxation Planning

b. Deduct those expenses, which are not claimed but are allowable as deduction under Notes
sections 30 to 37.
c. Add those expenses which have been debited to Profit & loss A/c but are not
allowable as deduction u/s 40, 40A and 43B.
d. Deduct those incomes which have been credited to Profit & Loss A/c but which are
not chargeable to income tax.
e. Add those incomes which have not been credited to Profit & Loss A/c but which are
taxable as business income under Section 28 described above.

5. As stated above Sections 30 to Section 37 deal with various expenses which will be allowed
as a deduction in getting the amount of taxable business or professional income.

11.7.2 Expenses allowed as Deductions

Profits of business or gains from profession are calculated after allowing all legitimate business
expenditure. Some important deductions admissible in computing income from business or
profession are as follows [sections 30 to 36 of Income Tax Act]:

Rent, rates, taxes, repairs and insurance for business or professional premises [section 30
of Income Tax Act]

Current repairs and insurance of machinery, plant and furniture [section 31 of Income Tax
Act]
Depreciation on building, machinery, plant or furniture [section 32 of Income Tax Act]

Revenue expenditure on scientific research [section 35(1) of Income Tax Act]
Capital expenditure on scientific research related to business (except land) [section 35(2) of
Income Tax Act]

Preliminary expenses in relation to formation of a company or in connection with extension
of an undertaking or setting up of a new industrial unit can be amortized in 5 equal
installments over 5 years. The preliminary expenditure is permitted only upto 5% of cost
of project [section 35D]
Insurance expenses [section 36(1)(i) of Income Tax Act]
Insurance premium on health of employees [section 36(1)(ib) of Income Tax Act]

Bonus or commission to employees [section 36(1)(ii) of Income Tax Act]
Interest on borrowed capital [section 36(1)(iii) of Income Tax Act]
Contributions towards approved provident fund, superannuation fund and gratuity fund
[section 36(1)(iv) and 36(1)(v) of Income Tax Act]

Bad debts in respect of income considered in previous years can be written off and allowable
as deduction [section 36(1)(viii) of Income Tax Act]

Banking cash transaction tax [section 36(1)(xiii) of Income Tax Act]
Advertisement expenditure is fully allowed as deduction. However, expenditure incurred
on advertisement in any souvenir, brochure, pamphlet etc. of a political party is not
allowed as a deduction [section 37(2B) of Income Tax Act]
Expenditure in maintenance of guest house is permissible as deduction [section 36(1)(i) of
Income Tax Act]

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