Tax Ready Reckoner

Section 145 of the Income Tax Act, 1961 governs the method of accounting for computing taxable income under the heads “Profits and Gains of Business or Profession” (PGBP) and “Income from Other Sources.” It also introduces Income Computation and Disclosure Standards (ICDS), which standardize income computation for tax purposes. 1. Methods of Accounting [Section 145(1)] Taxpayers must adopt one of the following methods for income computation: […]

Under the Income Tax Act, 1961, the following business/profession expenses are expressly allowed as deductions when computing taxable income: 1. Deductions for Rent, Repairs & Insurance of Business Premises [Section 30] Section 30 of the Income Tax Act allows deductions for expenses related to business premises under three categories: 1. Rent for Business Premises [Section

Section 37(1) of the Income Tax Act, 1961 is a crucial provision that allows businesses and professionals to claim deductions for expenses incurred wholly and exclusively for business or profession, provided they are not capital or personal in nature and not covered under Sections 30 to 36. This section serves as a residual provision, covering expenses that do not fall under other specific

1. Key Provision Section 37(2B)of the Income Tax Act, 1961, disallows any deduction for expenses incurred on advertisements in political party publications (e.g., souvenirs, brochures, or event sponsorships). This applies to businesses and professionals claiming expenses under “Profits and Gains of Business or Profession” (PGBP). 2. Conditions for Disallowance Nature of Expense: Payments made to political parties or their affiliatesfor advertisements.

Section 38 of the Income Tax Act, 1961 governs deductions for depreciation and other expenses related to assets (buildings, plant & machinery, furniture) that are partly used for business and partly for non-business purposes. 1. Key Provisions A.  Partial Business Use (Section 38(1)) If an asset is not exclusively used for business, deductions are proportionately disallowed. Formula: Allowable Expense = Total Expense

Under the Income Tax Act, 1961, certain expenses are expressly disallowed while computing taxable income under the head “Profits and Gains of Business or Profession” (PGBP). These restrictions are outlined in Sections 40(a), 40(b), and 40(ba) to prevent tax evasion and ensure compliance. Below is a detailed breakdown of these provisions: 1. Section 40(a): Disallowance Due to Non-Compliance with

Section 40A of the Income Tax Act, 1961 specifies certain expenses or payments that cannot be deducted while computing taxable income under the head “Profits and Gains of Business or Profession” (PGBP). These provisions aim to prevent tax evasion, ensure compliance, and promote transparency in business transactions. Below is a detailed breakdown of the key disallowances under Section 40A, along with conditions, exceptions,

Section 43B of the Income Tax Act, 1961 is a crucial provision that disallows certain expenses unless they are actually paid by the assessee during the previous year. This section overrides the accrual system of accounting and ensures that deductions are claimed only when payments are made. Key Features of Section 43B Cash Basis Over Accrual Basis: Even if an expense is recorded

Section 43CA of the Income Tax Act, 1961 addresses the taxation of undervalued transactions involving business assets (non-capital assets) such as inventory, land, or building held as stock-in-trade. 1. Key Features of Section 43CA Objective: Prevents underreporting of sale consideration for non-capital assets(e.g., real estate held as stock-in-trade). Applicability: Sellersengaged in real estate business (buildings/land held as inventory). Buyersmay also face implications under Section 56(2)(x) if undervaluation