No, Notarization or Registration of a Will is Not Mandatory under Indian Law.But both are optional legal steps that can help reduce disputes and strengthen the Will’s authenticity. Section 63 of the Indian Succession Act, 1925: It lays down only three mandatory conditions for a valid Will: It must bRead more
No, Notarization or Registration of a Will is Not Mandatory under Indian Law.But both are optional legal steps that can help reduce disputes and strengthen the Will’s authenticity.
Section 63 of the Indian Succession Act, 1925:
It lays down only three mandatory conditions for a valid Will:
It must be in writing.
Signed by the testator.
Attested by two or more witnesses.
Also, Section 18(e) of the Registration Act, 1908 says that
Hi You can mention ancestral property in your Will only to the extent of your own share.You cannot will the entire ancestral property if it belongs to a Hindu Undivided Family (HUF) or is undivided. To avoid future disputes: Clearly state in the Will whether the property is self-acquired or ancestraRead more
Hi
You can mention ancestral property in your Will only to the extent of your own share. You cannot will the entire ancestral property if it belongs to a Hindu Undivided Family (HUF) or is undivided.
To avoid future disputes:
Clearly state in the Will whether the property is self-acquired or ancestral.
If it is ancestral and you are bequeathing only your share, mention it specifically.
You may include a declaration in your Will like:
“I hereby bequeath my share in the ancestral property situated at [Address], which stands to my name after partition, to my daughter [Name]…”
Hi Nomination gives a person the right to receive, but not necessarily the right to own the asset permanently. Nomination is governed by sectoral laws such as: Section 39 of the Insurance Act, 1938 (for insurance policies), Companies Act, 2013 (for shares/securities), Banking Regulation Act (for banRead more
Hi
Nomination gives a person the right to receive, but not necessarily the right to own the asset permanently.
Nomination is governed by sectoral laws such as:
Section 39 of the Insurance Act, 1938 (for insurance policies),
How to get the deduction of advertisement expenditure under the Income Tax Act? 1. Relevant Legal Provisions: below are the relevent provision of Income Tax Act which cover this issue: Section 37(1) – General deductions under business and profession Section 80G – Deduction for charitable contributiRead more
How to get the deduction of advertisement expenditure under the Income Tax Act?
1. Relevant Legal Provisions:
below are the relevent provision of Income Tax Act which cover this issue:
Section 37(1) – General deductions under business and profession
Section 80G – Deduction for charitable contributions (related to certain types of advertising)
Section 43B – Certain deductions allowed on actual payment basis
2. Deduction of Advertisement Expenditure:
Advertisement expenditure is generally allowable as a deduction under Section 37(1) of the Income Tax Act. For a business or profession, advertisement is an essential part of its operation and marketing, and expenses incurred on it are eligible for deduction, provided the expenditure is incurred wholly and exclusively for the purpose of business.
Section 37(1) states:
“Any expenditure (not being of a capital nature, personal in nature, or illegal) incurred wholly and exclusively for the purpose of the business or profession is allowable as a deduction.”
3. Key Conditions for Deductibility:
To ensure that the advertisement expenses qualify for deduction under Section 37(1), the following conditions must be satisfied:
Purpose of Business: The expenditure must be incurred for business promotion, such as advertisements in newspapers, magazines, TV, radio, internet, etc., and must directly serve the purpose of expanding the business or increasing sales.
Actual Payment: The expenditure must have been actually incurred and not merely an accrual (Section 43B). For example, the advertisement costs paid through invoices during the financial year should be claimed.
Not Capital in Nature: The advertisement expenses are typically revenue in nature, not capital. If the expenditure leads to creating an asset (e.g., creating a trademark or brand value), it could be treated as capital expenditure and would not be deductible under Section 37(1).
4. Common Types of Deductible Advertisement Expenditures:
Type of Advertisement
Description
Deductibility
Print Media (Newspapers, Magazines)
Costs of placing ads in newspapers, magazines, etc.
Fully deductible as a business expense.
Electronic Media (TV, Radio, Internet)
Expenses related to advertising on TV, radio, or online platforms.
Fully deductible as a business expense.
Billboards/Outdoor Advertising
Expenses for billboard ads, banners, hoardings, etc.
Fully deductible as a business expense.
Direct Mail Campaigns
Costs of designing and sending brochures or flyers.
Fully deductible as a business expense.
Sponsorships
Costs of sponsoring events for publicity.
Fully deductible as a business expense.
5. What is Not Deductible?
Certain advertisement-related expenditures may not qualify for deductions under Section 37(1):
Capital Expenditure: Expenditure incurred to create intangible assets (such as the development of a new brand or logo) is not deductible. These costs are typically capitalized and amortized over time.
Personal Advertising: Advertising that is personal in nature (e.g., a personal blog promoting an individual’s image) is not deductible.
Illegal or Unethical Advertising: Any expenditure that violates public policy or is made for illegal activities will be disallowed. For instance, ads promoting unlawful goods or services are not eligible for a deduction.
💡 6. Advertising in Special Circumstances:
Section 80G allows deductions for certain advertising expenditures when the advertisement is for charitable organizations or causes. This applies to expenses related to advertising in support of charitable events or public welfare causes.
Section 43B: If the advertisement expenses are part of a contractual arrangement that involves deferred payment, the deduction may be allowed only when the payment is made. This applies to cases where an advertisement contract requires payment in installments.
✅ 7. Conclusion:
Under Section 37(1), businesses can claim a deduction for advertisement expenses incurred wholly and exclusively for the purpose of business. This includes various media channels such as print, electronic, online, and outdoor advertising. However, such deductions are subject to certain conditions like actual payment, being revenue in nature, and being incurred for business purposes.
What is the general deduction under Income Tax Act? 1. Relevant Legal Provisions: Section 10 to 13A – Exemptions, exclusions, and deductions for specific income categories Section 37 – General deductions under business and profession Section 80C to 80U – Specific deductions under Chapter VI-A SectioRead more
What is the general deduction under Income Tax Act?
1. Relevant Legal Provisions:
Section 10 to 13A – Exemptions, exclusions, and deductions for specific income categories
Section 37 – General deductions under business and profession
Section 80C to 80U – Specific deductions under Chapter VI-A
Section 35 – Deduction for scientific research
2. General Deduction (Section 37) Explained:
General deduction under the Income Tax Act refers to the allowance for expenses incurred wholly and exclusively for the purpose of business or profession. These deductions are available to reduce the overall taxable income, making it more beneficial for businesses and individuals involved in professional activities.
Section 37 of the Income Tax Act outlines the general deduction provisions:
“Any expenditure (not being of a capital nature, personal or illegal) incurred wholly and exclusively for the purpose of the business or profession is allowed as a deduction.”
In other words, a deduction can be claimed for any expenditure that is directly related to the business or profession and is incurred in the course of earning business income, provided it is not:
Capital expenditure (e.g., buying assets like machinery)
Personal in nature (e.g., family-related expenses)
Illegal or unethical (e.g., bribes, kickbacks)
🧾 3. Common Examples of General Deductions:
Expenditure Type
Details
Business expenses
Salaries, rent, utilities, office expenses, etc., incurred for running a business.
Depreciation
On assets used for business (such as machinery, vehicles, etc.).
Interest on business loans
Interest paid on loans taken for business purposes.
Travel and transportation
Travel expenses for business purposes such as transportation, hotels, etc.
Legal and professional fees
Fees paid to lawyers, accountants, or other professionals for business-related services.
Repairs and maintenance
Costs of repairing and maintaining business assets.
Advertising and promotion costs
Costs incurred to promote the business, such as advertising, marketing, etc.
R&D expenses
Expenses related to research and development in scientific fields.
⚠️ 4. Exclusions from General Deduction:
Certain expenses cannot be claimed as a general deduction under Section 37, even if they are incurred for business or professional purposes. These include:
Capital Expenditure – Expenditure on the acquisition of assets like land, buildings, and machinery is capital in nature and hence, is not deductible under Section 37.
Personal Expenses – Personal expenses of a business owner or professional are not allowed. For instance, any expenses related to family welfare or personal health are excluded.
Illegal Payments – Expenditures related to bribes, kickbacks, or any illegal payments are not deductible.
Prohibited Payments – Payments not allowed under any other specific provisions of the Income Tax Act (e.g., fines or penalties paid for violating legal provisions).
💡 5. Important Notes:
Routine Business Expenditure: The Act encourages the deduction of routine, day-to-day business expenses that keep the business operational.
Admissibility: The expenditure should be actual (i.e., incurred and not just accrued) and substantiated with invoices, receipts, and proper records.
Taxable Income Impact: These deductions help businesses and professionals lower their taxable income and, consequently, reduce their tax liability.
✅ 6. Conclusion:
General deduction under Section 37 is a wide-ranging provision allowing deductions for expenses incurred wholly and exclusively for business or professional purposes. These can include salaries, rent, interest on loans, advertising costs, and more. However, the expenditure must not be capital, personal, or illegal. Understanding and utilizing this provision helps businesses reduce their taxable income and thereby minimize tax outflow.
What expenditures or payments are disallowed under Income Tax Act? 1. Relevant Legal Provisions: Section 40 – General disallowance of certain expenses Section 40A – Disallowance of certain cash payments Section 40A(2) – Disallowance of excessive payments to related parties Section 40(a) – DisallowanRead more
What expenditures or payments are disallowed under Income Tax Act?
1. Relevant Legal Provisions:
Section 40 – General disallowance of certain expenses
Section 40A – Disallowance of certain cash payments
Section 40A(2) – Disallowance of excessive payments to related parties
Section 40(a) – Disallowance related to non-deduction of TDS
Section 43B – Certain expenses only allowed on actual payment basis
2. General Expenditures Disallowed Under the Income Tax Act:
2.1. Non-deduction of TDS (Section 40(a))
If TDS is not deducted on certain payments (e.g., rent, professional fees, salary), then such payments will be disallowed.
Section 40(a)(ia) – If TDS is not deducted or deposited before the due date of filing of ITR, the expenditure will be disallowed.
deduction will be disallowed in computing the income.
2.2. Payments Exceeding ₹10,000 in Cash (Section 40A(3))
Any expenditure made in cash exceeding ₹10,000 in a day to a single person is disallowed unless it falls under the exceptions.
2.3. Excessive Payments to Relatives or Related Parties (Section 40A(2))
Expenditure or payments made to relatives or related parties which are deemed to be excessive or unreasonable in the opinion of the Assessing Officer will be disallowed.
2.4. Payments to Non-Residents Without TDS (Section 40(a)(i))
Payments made to non-residents without deducting tax at source (TDS), or not depositing the deducted TDS, are disallowed.
2.5. Unpaid Liabilities (Section 43B)
Certain expenditures like taxes, duties, and contributions to employee welfare schemes are allowed only if paid on time. If not paid within the relevant period, they will be disallowed.
2.6. Capital Expenditure Without Actual Usage
Capital expenditure on assets not put to use for business purposes is disallowed.
2.7. Illegal Payments (Section 37)
Any illegal payments or expenses made, including bribes or kickbacks, will be disallowed under Section 37, which disallows expenses not wholly and exclusively incurred for the business.
2.8. Personal Expenses
Personal expenditures that are not related to business are disallowed.
2.9. Depreciation on Ineligible Assets
Depreciation is allowed only on assets used for business purposes. If an asset is not used for business, depreciation on it will be disallowed.
3. Summary Table: Disallowed Expenses Under Income Tax Act
📅 Type of Payment/Expenditure
📜 Relevant Section
✅ Disallowed/Conditions
Non-deduction of TDS
Section 40(a)
Expenditure disallowed if TDS not deducted or deposited
Payments over ₹10,000 in Cash
Section 40A(3)
Disallowed if paid in cash (exceptions apply)
Excessive payments to relatives or related parties
Expenditures or payments are disallowed under the Income Tax Act if they do not meet the prescribed conditions of deduction, such as failing to comply with TDS provisions, being paid in cash exceeding specified limits, being excessive or unreasonable when paid to related parties, or being of a personal or illegal nature. Always ensure that payments are backed by proper documentation and are in compliance with the legal provisions to avoid disallowance.
Whether default of TDS is not allowed in Income Tax Act? Yes, default in TDS can lead to disallowance of expenses and penal consequences. 📌 As per Section 40(a)(ia): “30% of any sum payable to a resident on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or,Read more
Whether default of TDS is not allowed in Income Tax Act?
Yes, default in TDS can lead to disallowance of expenses and penal consequences.
📌 As per Section 40(a)(ia):
“30% of any sum payable to a resident 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… shall not be allowed as deduction in computing the income chargeable under the head ‘Profits and gains of business or profession’.”
In Simple Terms:
If TDS is:
Not deducted – 30% of such expense is disallowed.
Deducted but not deposited within due date of ITR filing (Sec 139(1)) – 30% is disallowed.
✅ However, if TDS is paid later, the disallowed amount is allowed as deduction in the year of actual payment.
Whether payment made to relatives is disallowed under Income Tax Act? 1. Relevant Provisions in the Income Tax Act: Section 40A(2)(a) – Disallowance of excessive or unreasonable payments to related parties (including relatives) Explanation (b) to Section 40A(2) – Defines "related persons" Section 64Read more
Whether payment made to relatives is disallowed under Income Tax Act?
1. Relevant Provisions in the Income Tax Act:
Section 40A(2)(a) – Disallowance of excessive or unreasonable payments to related parties (including relatives)
Explanation (b) to Section 40A(2) – Defines “related persons”
Section 64 – Clubbing of income if remuneration is paid to spouse without substantial contribution
2. Can Payment to Relatives Be Allowed as Deduction?
Yes, payment to relatives is not automatically disallowed, but subject to scrutiny under Section 40A(2) of the Act.
The law only disallows the portion of payment which is “excessive or unreasonable” having regard to:
Fair Market Value (FMV) of the goods/services
Legitimate needs of the business
Benefit derived by the business
So, if the payment is at arm’s length and justifiable, it is allowed.
3. Bare Act Text: Section 40A(2)(a)
“Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section, and the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable… so much of the expenditure as is so considered by him shall not be allowed as a deduction.”
4. Who Are Treated as “Relatives” for This Purpose?
As per Explanation (b) to Section 40A(2):
The term includes (but is not limited to):
Spouse of the individual
Brother or sister of the individual
Brother or sister of the spouse
Any lineal ascendant or descendant of the individual or spouse
Any individual having substantial interest in the business or profession of the assessee
Also includes entities in which such relatives have substantial interest.
5. Example Case:
Let’s say a sole proprietor pays ₹40,000/month salary to his brother for doing clerical work.
If the market salary for such work is ₹20,000/month, then ₹20,000 may be considered excessive.
The Assessing Officer (AO) can disallow ₹20,000/month as unreasonable expenditure under Section 40A(2).
6. What to Keep in Mind:
✅ Maintain proper documentation (appointment letter, qualification proof, work scope) ✅ Justify payment amount based on industry rates or FMV ✅ Avoid cash payments – use banking channels ✅ Make sure the relative actually works for the business
7. Clubbing of Income (Section 64): A Separate Concern
Even if salary paid to a spouse is reasonable, under Section 64(1)(ii):
If no technical or professional qualification is held by the spouse and she/he does not contribute substantially, the income is clubbed with the assessee’s income.
This is not a disallowance of expense, but clubbing of income for taxation.
✅ Conclusion:
💡 Payments to relatives are not outright disallowed, but only the unreasonable or excessive portion is disallowed under Section 40A(2).
Proper business justification, recordkeeping, and arm’s length payment are essential to ensure deduction is allowed.
1. Three sections deal with this matter: Section 40A(3) – Disallowance of cash expenditure Section 40A(3A) – Treatment of unpaid expenses paid in cash in subsequent years Rule 6DD – Exceptions to the above disallowance 2. What Does Section 40A(3) Say?" Where the assessee incurs any expenditure in reRead more
1. Three sections deal with this matter:
Section 40A(3) – Disallowance of cash expenditure
Section 40A(3A) – Treatment of unpaid expenses paid in cash in subsequent years
Rule 6DD – Exceptions to the above disallowance
2. What Does Section 40A(3) Say?“
Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque or bank draft or use of electronic clearing system through a bank account, exceeds ₹10,000, no deduction shall be allowed in respect of such expenditure.”
✅ Key Points:
🔍 Particular
📋 Rule
Threshold limit
₹10,000 per person per day
Mode of payment
Must be through banking channel or electronic modes
Cash payments > ₹10,000
Disallowed as business expense
For transporters (hiring plying goods)
₹35,000 per day limit
🔁 3. What is Section 40A(3A)?
If an expense was allowed in a previous year on accrual basis, but it is actually paid in cash in a later year exceeding ₹10,000, then the cash payment is deemed as income of the year of payment.
📌 In simple terms: The deduction is reversed and taxed in the year of cash payment.
🔒 4. Exceptions under Rule 6DD
Certain genuine situations allow cash payments > ₹10,000 without disallowance:
✅ Permissible Situations (Rule 6DD)
Payment to government where banking service not available
Payment made to villagers or agriculturists without bank access
Payment on bank holidays or during natural calamities
Payment to hospital, hotel, or transport agency in emergencies
Payment made by village cooperative societies to members
📌 Note: The burden of proving the genuineness of such payments lies on the taxpayer.
🧾 5. Penalty or Consequence:
No penalty directly, but expenditure is disallowed, thereby increasing taxable profit.
1. What is ‘Deemed Profit’? The term ‘deemed profit’ refers to certain incomes that are not actual profits in a traditional sense (like business turnover or service income), but which the Income Tax Act treats or "deems" to be profits for the purpose of taxation. 👉 These are fictitious or assumed prRead more
1. What is ‘Deemed Profit’?
The term ‘deemed profit’ refers to certain incomes that are not actual profits in a traditional sense (like business turnover or service income), but which the Income Tax Act treats or “deems” to be profits for the purpose of taxation.
👉 These are fictitious or assumed profits, taxed as if they were earned by the taxpayer — even if no real gain was realized.
🧾 2. Legal Basis for Deemed Profits in the Income Tax Act
The Income Tax Act does not define “deemed profit” directly in a single section, but it refers to the concept in various provisions, especially in the following sections:
🧾 Section
🔍 Provision
Section 41(1)
Recovery of previously allowed expenses (like bad debts recovered, remission of trading liability)
Section 41(2)
Balancing charge on sale of depreciable assets (applicable to power generation companies)
Section 32AC/32AD
Withdrawal of investment allowance
Section 28(iv)
Value of benefit/perquisite arising from business treated as income
Section 40A(3)/(3A)
Disallowance of cash expenditure > ₹10,000 treated as profit
Section 36(1)(va)
Delay in deposit of employee’s contribution to PF/ESI treated as income
🧾 3. Common Examples of Deemed Profits
Here are typical scenarios where deemed profit provisions apply:
✅ A. Recovery of Written-Off Items (Section 41(1))
If an expense like bad debt, liability, or trading expense was allowed earlier but later recovered, it is treated as business income in the year of recovery.
📘 Bare Act Text (Section 41(1)):
“Where an allowance or deduction has been made in the assessment for any year… and the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure… such amount shall be deemed to be profits and gains of business.”
✅ B. Sale of Business Asset Beyond WDV (Section 41(2))
Applicable to power-generating companies, if an asset is sold for more than its WDV but less than original cost, the difference is deemed as profit (balancing charge).
✅ C. Value of Benefit or Perquisite (Section 28(iv))
If a business receives any benefit in kind (e.g., free assets, discounts, gifts), the FMV (Fair Market Value) is taxed as business income.
✅ D. Forfeited Advance (Section 51)
In case of transfer of a capital asset, if advance money is forfeited and the transaction does not materialize, it is taxed as income under Section 56(2)(ix), and not deducted from cost.
✅ E. Amount Not Spent for Specific Deductions
Example: Section 35AD allows deduction for capital expenditure. If asset is not used for specified purpose for 8 years, the deduction claimed earlier becomes deemed income.
💰 4. How Is Deemed Profit Taxed?
Deemed profits are taxed under “Profits and Gains of Business or Profession” (PGBP)
Taxed at normal slab rates
No special benefit like indexation, deduction (unless specifically provided)
Is the Notarization or Registration of a will mandatory?
No, Notarization or Registration of a Will is Not Mandatory under Indian Law.But both are optional legal steps that can help reduce disputes and strengthen the Will’s authenticity. Section 63 of the Indian Succession Act, 1925: It lays down only three mandatory conditions for a valid Will: It must bRead more
No, Notarization or Registration of a Will is Not Mandatory under Indian Law.But both are optional legal steps that can help reduce disputes and strengthen the Will’s authenticity.
Section 63 of the Indian Succession Act, 1925:
It lays down only three mandatory conditions for a valid Will:
It must be in writing.
Signed by the testator.
Attested by two or more witnesses.
Also, Section 18(e) of the Registration Act, 1908 says that
See lessCan I mentioned my ancestors property in to my will?
Hi You can mention ancestral property in your Will only to the extent of your own share.You cannot will the entire ancestral property if it belongs to a Hindu Undivided Family (HUF) or is undivided. To avoid future disputes: Clearly state in the Will whether the property is self-acquired or ancestraRead more
Hi
You can mention ancestral property in your Will only to the extent of your own share.
You cannot will the entire ancestral property if it belongs to a Hindu Undivided Family (HUF) or is undivided.
To avoid future disputes:
-
-
-
See lessClearly state in the Will whether the property is self-acquired or ancestral.
If it is ancestral and you are bequeathing only your share, mention it specifically.
You may include a declaration in your Will like:
Should I mention the property assets in will where nomination have been filed? What will be impact on nomination of this effect?
Hi Nomination gives a person the right to receive, but not necessarily the right to own the asset permanently. Nomination is governed by sectoral laws such as: Section 39 of the Insurance Act, 1938 (for insurance policies), Companies Act, 2013 (for shares/securities), Banking Regulation Act (for banRead more
Hi
Nomination gives a person the right to receive, but not necessarily the right to own the asset permanently.
Nomination is governed by sectoral laws such as:
Section 39 of the Insurance Act, 1938 (for insurance policies),
Companies Act, 2013 (for shares/securities),
Banking Regulation Act (for bank accounts),
EPF Act (for PF/Gratuity),
Co-operative Societies Acts (for housing societies).
Nomination only authorizes a nominee to receive the asset upon the death of the holder — not to inherit it.
The Supreme Court in Sarbati Devi v. Usha Devi (1984) held:
This means:
So, Always mention the details of the property in the will even though nomination is made.
See lessHowt to get deduction of advertisement expenditure under Income Tax Act?
How to get the deduction of advertisement expenditure under the Income Tax Act? 1. Relevant Legal Provisions: below are the relevent provision of Income Tax Act which cover this issue: Section 37(1) – General deductions under business and profession Section 80G – Deduction for charitable contributiRead more
How to get the deduction of advertisement expenditure under the Income Tax Act?
1. Relevant Legal Provisions:
below are the relevent provision of Income Tax Act which cover this issue:
Section 37(1) – General deductions under business and profession
Section 80G – Deduction for charitable contributions (related to certain types of advertising)
Section 43B – Certain deductions allowed on actual payment basis
2. Deduction of Advertisement Expenditure:
Advertisement expenditure is generally allowable as a deduction under Section 37(1) of the Income Tax Act. For a business or profession, advertisement is an essential part of its operation and marketing, and expenses incurred on it are eligible for deduction, provided the expenditure is incurred wholly and exclusively for the purpose of business.
Section 37(1) states:
3. Key Conditions for Deductibility:
To ensure that the advertisement expenses qualify for deduction under Section 37(1), the following conditions must be satisfied:
Purpose of Business: The expenditure must be incurred for business promotion, such as advertisements in newspapers, magazines, TV, radio, internet, etc., and must directly serve the purpose of expanding the business or increasing sales.
Actual Payment: The expenditure must have been actually incurred and not merely an accrual (Section 43B). For example, the advertisement costs paid through invoices during the financial year should be claimed.
Not Capital in Nature: The advertisement expenses are typically revenue in nature, not capital. If the expenditure leads to creating an asset (e.g., creating a trademark or brand value), it could be treated as capital expenditure and would not be deductible under Section 37(1).
4. Common Types of Deductible Advertisement Expenditures:
5. What is Not Deductible?
Certain advertisement-related expenditures may not qualify for deductions under Section 37(1):
Capital Expenditure: Expenditure incurred to create intangible assets (such as the development of a new brand or logo) is not deductible. These costs are typically capitalized and amortized over time.
Personal Advertising: Advertising that is personal in nature (e.g., a personal blog promoting an individual’s image) is not deductible.
Illegal or Unethical Advertising: Any expenditure that violates public policy or is made for illegal activities will be disallowed. For instance, ads promoting unlawful goods or services are not eligible for a deduction.
💡 6. Advertising in Special Circumstances:
Section 80G allows deductions for certain advertising expenditures when the advertisement is for charitable organizations or causes. This applies to expenses related to advertising in support of charitable events or public welfare causes.
Section 43B: If the advertisement expenses are part of a contractual arrangement that involves deferred payment, the deduction may be allowed only when the payment is made. This applies to cases where an advertisement contract requires payment in installments.
✅ 7. Conclusion:
Under Section 37(1), businesses can claim a deduction for advertisement expenses incurred wholly and exclusively for the purpose of business. This includes various media channels such as print, electronic, online, and outdoor advertising. However, such deductions are subject to certain conditions like actual payment, being revenue in nature, and being incurred for business purposes.
See lessWhat is the general deduction?
What is the general deduction under Income Tax Act? 1. Relevant Legal Provisions: Section 10 to 13A – Exemptions, exclusions, and deductions for specific income categories Section 37 – General deductions under business and profession Section 80C to 80U – Specific deductions under Chapter VI-A SectioRead more
What is the general deduction under Income Tax Act?
1. Relevant Legal Provisions:
Section 10 to 13A – Exemptions, exclusions, and deductions for specific income categories
Section 37 – General deductions under business and profession
Section 80C to 80U – Specific deductions under Chapter VI-A
Section 35 – Deduction for scientific research
2. General Deduction (Section 37) Explained:
General deduction under the Income Tax Act refers to the allowance for expenses incurred wholly and exclusively for the purpose of business or profession. These deductions are available to reduce the overall taxable income, making it more beneficial for businesses and individuals involved in professional activities.
Section 37 of the Income Tax Act outlines the general deduction provisions:
In other words, a deduction can be claimed for any expenditure that is directly related to the business or profession and is incurred in the course of earning business income, provided it is not:
Capital expenditure (e.g., buying assets like machinery)
Personal in nature (e.g., family-related expenses)
Illegal or unethical (e.g., bribes, kickbacks)
🧾 3. Common Examples of General Deductions:
⚠️ 4. Exclusions from General Deduction:
Certain expenses cannot be claimed as a general deduction under Section 37, even if they are incurred for business or professional purposes. These include:
Capital Expenditure – Expenditure on the acquisition of assets like land, buildings, and machinery is capital in nature and hence, is not deductible under Section 37.
Personal Expenses – Personal expenses of a business owner or professional are not allowed. For instance, any expenses related to family welfare or personal health are excluded.
Illegal Payments – Expenditures related to bribes, kickbacks, or any illegal payments are not deductible.
Prohibited Payments – Payments not allowed under any other specific provisions of the Income Tax Act (e.g., fines or penalties paid for violating legal provisions).
💡 5. Important Notes:
Routine Business Expenditure: The Act encourages the deduction of routine, day-to-day business expenses that keep the business operational.
Admissibility: The expenditure should be actual (i.e., incurred and not just accrued) and substantiated with invoices, receipts, and proper records.
Taxable Income Impact: These deductions help businesses and professionals lower their taxable income and, consequently, reduce their tax liability.
✅ 6. Conclusion:
General deduction under Section 37 is a wide-ranging provision allowing deductions for expenses incurred wholly and exclusively for business or professional purposes. These can include salaries, rent, interest on loans, advertising costs, and more. However, the expenditure must not be capital, personal, or illegal. Understanding and utilizing this provision helps businesses reduce their taxable income and thereby minimize tax outflow.
See lessWhat expenditures or payments are disallowed under Income Tax Act?
What expenditures or payments are disallowed under Income Tax Act? 1. Relevant Legal Provisions: Section 40 – General disallowance of certain expenses Section 40A – Disallowance of certain cash payments Section 40A(2) – Disallowance of excessive payments to related parties Section 40(a) – DisallowanRead more
What expenditures or payments are disallowed under Income Tax Act?
1. Relevant Legal Provisions:
Section 40 – General disallowance of certain expenses
Section 40A – Disallowance of certain cash payments
Section 40A(2) – Disallowance of excessive payments to related parties
Section 40(a) – Disallowance related to non-deduction of TDS
Section 43B – Certain expenses only allowed on actual payment basis
2. General Expenditures Disallowed Under the Income Tax Act:
2.1. Non-deduction of TDS (Section 40(a))
Section 40(a)(ia) – If TDS is not deducted or deposited before the due date of filing of ITR, the expenditure will be disallowed.
deduction will be disallowed in computing the income.
2.2. Payments Exceeding ₹10,000 in Cash (Section 40A(3))
2.3. Excessive Payments to Relatives or Related Parties (Section 40A(2))
2.4. Payments to Non-Residents Without TDS (Section 40(a)(i))
2.5. Unpaid Liabilities (Section 43B)
2.6. Capital Expenditure Without Actual Usage
2.7. Illegal Payments (Section 37)
2.8. Personal Expenses
2.9. Depreciation on Ineligible Assets
3. Summary Table: Disallowed Expenses Under Income Tax Act
✅ Conclusion:
Expenditures or payments are disallowed under the Income Tax Act if they do not meet the prescribed conditions of deduction, such as failing to comply with TDS provisions, being paid in cash exceeding specified limits, being excessive or unreasonable when paid to related parties, or being of a personal or illegal nature. Always ensure that payments are backed by proper documentation and are in compliance with the legal provisions to avoid disallowance.
See lessWhether default of TDS is not allowed in Income Tax Act?
Whether default of TDS is not allowed in Income Tax Act? Yes, default in TDS can lead to disallowance of expenses and penal consequences. 📌 As per Section 40(a)(ia): “30% of any sum payable to a resident on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or,Read more
Whether default of TDS is not allowed in Income Tax Act?
Yes, default in TDS can lead to disallowance of expenses and penal consequences.
📌 As per Section 40(a)(ia):
In Simple Terms:
If TDS is:
Not deducted – 30% of such expense is disallowed.
Deducted but not deposited within due date of ITR filing (Sec 139(1)) – 30% is disallowed.
✅ However, if TDS is paid later, the disallowed amount is allowed as deduction in the year of actual payment.
See lessWhether payment made to relatives is disallowed under Income Tax Act?
Whether payment made to relatives is disallowed under Income Tax Act? 1. Relevant Provisions in the Income Tax Act: Section 40A(2)(a) – Disallowance of excessive or unreasonable payments to related parties (including relatives) Explanation (b) to Section 40A(2) – Defines "related persons" Section 64Read more
Whether payment made to relatives is disallowed under Income Tax Act?
1. Relevant Provisions in the Income Tax Act:
Section 40A(2)(a) – Disallowance of excessive or unreasonable payments to related parties (including relatives)
Explanation (b) to Section 40A(2) – Defines “related persons”
Section 64 – Clubbing of income if remuneration is paid to spouse without substantial contribution
2. Can Payment to Relatives Be Allowed as Deduction?
Yes, payment to relatives is not automatically disallowed, but subject to scrutiny under Section 40A(2) of the Act.
The law only disallows the portion of payment which is “excessive or unreasonable” having regard to:
Fair Market Value (FMV) of the goods/services
Legitimate needs of the business
Benefit derived by the business
So, if the payment is at arm’s length and justifiable, it is allowed.
3. Bare Act Text: Section 40A(2)(a)
4. Who Are Treated as “Relatives” for This Purpose?
As per Explanation (b) to Section 40A(2):
The term includes (but is not limited to):
Spouse of the individual
Brother or sister of the individual
Brother or sister of the spouse
Any lineal ascendant or descendant of the individual or spouse
Any individual having substantial interest in the business or profession of the assessee
Also includes entities in which such relatives have substantial interest.
5. Example Case:
Let’s say a sole proprietor pays ₹40,000/month salary to his brother for doing clerical work.
If the market salary for such work is ₹20,000/month, then ₹20,000 may be considered excessive.
The Assessing Officer (AO) can disallow ₹20,000/month as unreasonable expenditure under Section 40A(2).
6. What to Keep in Mind:
✅ Maintain proper documentation (appointment letter, qualification proof, work scope)
✅ Justify payment amount based on industry rates or FMV
✅ Avoid cash payments – use banking channels
✅ Make sure the relative actually works for the business
7. Clubbing of Income (Section 64): A Separate Concern
Even if salary paid to a spouse is reasonable, under Section 64(1)(ii):
This is not a disallowance of expense, but clubbing of income for taxation.
✅ Conclusion:
Proper business justification, recordkeeping, and arm’s length payment are essential to ensure deduction is allowed.
See lesswhat is deemed profit and how it is taxed under income tax act?
1. Three sections deal with this matter: Section 40A(3) – Disallowance of cash expenditure Section 40A(3A) – Treatment of unpaid expenses paid in cash in subsequent years Rule 6DD – Exceptions to the above disallowance 2. What Does Section 40A(3) Say?" Where the assessee incurs any expenditure in reRead more
1. Three sections deal with this matter:
Section 40A(3) – Disallowance of cash expenditure
Section 40A(3A) – Treatment of unpaid expenses paid in cash in subsequent years
Rule 6DD – Exceptions to the above disallowance
2. What Does Section 40A(3) Say?“
Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque or bank draft or use of electronic clearing system through a bank account, exceeds ₹10,000, no deduction shall be allowed in respect of such expenditure.”
✅ Key Points:
🔁 3. What is Section 40A(3A)?
📌 In simple terms: The deduction is reversed and taxed in the year of cash payment.
🔒 4. Exceptions under Rule 6DD
Certain genuine situations allow cash payments > ₹10,000 without disallowance:
🧾 5. Penalty or Consequence:
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See lessNo penalty directly, but expenditure is disallowed, thereby increasing taxable profit.
Results in higher income tax liability.
what is deemed profit and how it is taxed under income tax act?
1. What is ‘Deemed Profit’? The term ‘deemed profit’ refers to certain incomes that are not actual profits in a traditional sense (like business turnover or service income), but which the Income Tax Act treats or "deems" to be profits for the purpose of taxation. 👉 These are fictitious or assumed prRead more
1. What is ‘Deemed Profit’?
The term ‘deemed profit’ refers to certain incomes that are not actual profits in a traditional sense (like business turnover or service income), but which the Income Tax Act treats or “deems” to be profits for the purpose of taxation.
👉 These are fictitious or assumed profits, taxed as if they were earned by the taxpayer — even if no real gain was realized.
🧾 2. Legal Basis for Deemed Profits in the Income Tax Act
The Income Tax Act does not define “deemed profit” directly in a single section, but it refers to the concept in various provisions, especially in the following sections:
🧾 3. Common Examples of Deemed Profits
Here are typical scenarios where deemed profit provisions apply:
✅ A. Recovery of Written-Off Items (Section 41(1))
📘 Bare Act Text (Section 41(1)):
✅ B. Sale of Business Asset Beyond WDV (Section 41(2))
✅ C. Value of Benefit or Perquisite (Section 28(iv))
✅ D. Forfeited Advance (Section 51)
✅ E. Amount Not Spent for Specific Deductions
Example: Section 35AD allows deduction for capital expenditure. If asset is not used for specified purpose for 8 years, the deduction claimed earlier becomes deemed income.
💰 4. How Is Deemed Profit Taxed?
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See lessDeemed profits are taxed under “Profits and Gains of Business or Profession” (PGBP)
Taxed at normal slab rates
No special benefit like indexation, deduction (unless specifically provided)