The Evolution of Business Expenditure Deductions: Insights from Clause 34 of the Income Tax Bill, 2025 vs. Section 37 of the Income Tax Act, 1961

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..... es several amendments and new provisions aimed at modernizing and refining the taxation framework in India. One such provision is Clause 34, which outlines the general conditions for allowable deductions under the head "Profits and Gains of Business or Profession." This clause is pivotal in determining the deductibility of business expenditures and aligns with the existing provisions of Section 37 .....

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..... Conditions for Allowable Deductions Sub-section (1) of Clause 34 stipulates that any expenditure, excluding those specified in sections 28 to 33 and those of a capital or personal nature, incurred wholly and exclusively for business purposes, shall be deductible. This mirrors the language of Section 37(1) of the Income Tax Act, 1961, emphasizing the necessity for expenditures to be directly relat .....

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..... on expenditures deemed non-deductible under sub-section (2)(a), including: * Expenditures related to offenses or prohibited activities under any law, domestic or international. * Benefits or perquisites provided in violation of laws or regulations. * Expenditures for compounding offenses or settling proceedings related to legal contraventions. These clarifications are consistent with Expla .....

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..... ning deductible expenditures, there are notable differences: * CSR Expenditures: Clause 34 explicitly includes CSR expenditures as non-deductible, whereas Section 37 only implies this through Explanation 2. * Political Advertisements: Both provisions exclude expenditures on political advertisements, but Clause 34 provides a more detailed enumeration. * Clarifications on Illegal Expenditures: .....

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