Deduction from Business Income: Clause 32 of the Income Tax Bill, 2025 vs. Section 36 of the Income Tax Act, 1961

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..... ession. This article provides a detailed analysis of Clause 32 of the Income Tax Bill, 2025, and compares it with the corresponding provisions in Section 36 of the Income Tax Act, 1961, focusing on "other deductions." Objective and Purpose The legislative intent behind Clause 32 is to modernize the tax code by incorporating deductions that reflect current economic realities and business practices. The clause aims to encourage investment in infrastructure, support small industries, and promote employee welfare through specific deductions. By doing so, it seeks to foster an environment conducive to business growth and economic development. The historical context of these provisions lies in the evolution of the tax code to accommodate changi .....

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..... xpenditure by Corporations (Clause 32(1)(f)): Deductions for non-capital expenditures by statutory corporations are allowed, provided they are notified by the Central Government. This aligns with Section 36(1)(xii) of the 1961 Act. 7. Expenditure by Co-operative Societies (Clause 32(1)(g)): Expenditure on sugarcane purchases by co-operative societies manufacturing sugar is deductible, similar to Section 36(1)(xvii) of the 1961 Act. 8. Marked to Market Losses (Clause 32(1)(h)): Deduction for marked to market losses or expected losses as per income computation standards is allowed, aligning with Section 36(1)(xviii) of the 1961 Act. 9. Family Planning Expenditure (Clause 32(1)(i)): Deductions for family planning expenditures by com .....

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..... impacts include: - Compliance Requirements: Businesses must ensure compliance with the updated definitions and conditions for deductions, particularly concerning interest on borrowed capital and special reserves. - Investment Incentives: The deductions for contributions to credit guarantee funds and special reserves encourage investment in infrastructure and support for small industries. - Employee Welfare: Deductions for bonuses, commissions, and family planning expenditures promote employee welfare and align with corporate social responsibility initiatives. Conclusion Clause 32 of the Income Tax Bill, 2025, represents a comprehensive update to the tax code, aligning it with contemporary business practices and economic policies. .....

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