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TMI BlogBad and doubtful debt deductions - Clause 31 of the Income Tax Bill, 2025 vs. Section 36 of Income Tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... ll, 2025, introduces provisions for deductions related to bad debts and provisions for bad and doubtful debts. This clause is significant as it aims to update and refine the existing framework under which financial institutions can claim deductions. The clause is part of a broader legislative effort to modernize tax laws, aligning them with contemporary business practices and economic realities. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions. Detailed Analysis Sub-clause (1): Deduction for Provision for Bad and Doubtful Debts This sub-clause specifies the percentage of total income that certain financial institutions can claim as a deduction for provisions made for bad and doubtful debts. The specified assessees include scheduled banks, non-scheduled banks, and co-operative banks, with varying deduction limits based on their c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. It also provides for deductions based on income computation and disclosure standards, ensuring that deductions align with recognized accounting practices. Practical Implications Clause 31 has significant implications for financial institutions, particularly in terms of tax planning and compliance. By providing clear guidelines on deductions, the clause aids in reducing ambiguity and potentia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unted for in income computations, aligning with modern accounting standards. Conditions and Exclusions Clause 31 provides a more detailed framework for exclusions and conditions under which deductions can be claimed, compared to Section 36. This includes specific provisions for partial recoveries and the treatment of provisions versus actual bad debts. Conclusion Clause 31 of the Income Tax Bi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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