Deduction From Business Profit for the AY 2020-21

ADeductions 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). 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). 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 10 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. 1,50,000 ■ If book profit is positive: (i) Rs. 1,50,000 or 90% of book profit, whichever is more, on first Rs. 3 lakhs of book profit (ii)  60% of balance book profit

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