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Expenses not Deductible in Taxes

Which expenses are considered as ‘Expenses not Deductible’?[edit]

Expenditure on:

  • Advertisement in any Souvenir/Brochure etc., of a Political Party.
  • Wealth Tax payment, Income Tax, Penalties paid but not fine in nature of compensation.
  • Any tax calculated on the basis on Profits & Gains of the Business/Profession.
  • Any interest, salary, royalty, technical fees or other sum chargeable under this Act, payable outside India, on which no tax has been deducted at source.
  • Any interest, rent, commission, brokerage, professional charges paid to residents on which no tax has been deducted at source.

What is the meaning of ‘Set-off’ & ‘Carry forward’ of business losses[edit]

  • Set-off means adjustment of certain losses against income under other sources in the same assessment year. Carrying Forward of unadjusted losses to be set-off in subsequent years is called Carry Forward.

How to adjust Business Lossess[edit]

  • If there is a loss in the business, the same can be adjusted against profits made in any other business of the same tax payer.
  • The loss, if any, still remaining, can be adjusted against income from any other source. From A/Y 2005-06 loss from business cannot be set off against salary income.
  • However, loss sustained in speculative business can be adjusted only against profits earned in another speculative business. Business loss can be carried forward a maximum period of next 8 Assessment Years and adjusted against business profits of the subsequent years. Unabsorbed depreciation can be set-off even if business/profession is discontinued and can be carried forward for unlimited number of years.
  • However, for claiming the benefit of carry forward of losses, the tax payer has to invariable file his returns within due date.

What are the methods of Accounting[edit]

  • Every Business/Profession, as to follow either cash or mercantile system or accrual system of accounting for Business.

Which Professionals/Businessmen have to maintain books of account[edit]

  • The following PROFESSIONALS whose Gross Receipts from their profession exceeds Rs.1,50,000 p.a.(in any of the 3 immediate preceding previous years) have to maintain the books of account:

(1) Legal (2) Medical (3) Interior Decorator (4) Technical Consultancy (5) Film Artist (6) Engineering (7) Accountancy (8) Acting

  • As an Authorized Representative before any Tribual.
  • Every Businessman whose income from business exceeds Gross Receipt/turnover of Rs.15,00,000p.a in any of the 3 immediate preceding previous years will have to maintain books of accounts as per the Act W.e.f. 4-2-2002 books of accounts & other documents are to be preserved for a period of 6 years from the end of the relevant A/Y.
  • Is Audit of Accounts compulsory? For Businessmen:
  • Yes, when Gross turnover exceeds Rs.60lac

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