Bad money owed written off from the books of account is permitted as a deduction from the taxable earnings.
Tax deduction from dividends is necessary for each Indian firm or an organization that declares and makes cost of dividends inside India.
However, no tax shall be deducted from the cost of dividend to a person shareholder, ought to the cost be made by any mode apart from money and the mixture quantity of dividend paid or distributed to him throughout a monetary yr doesn’t exceed Rs 5,000.
According to on-line tax consultancy Taxmann, the relief from the deduction of tax is out there if the dividend is paid by any mode apart from money.
Taxmann’s advice is that like different provisions, Section 194 ought to have the optimistic checklist of the permissible mode of cost, that’s, an account payee cheque or account payee financial institution draft or use of digital clearing system by a checking account or by such different digital mode as could also be required.
The same modification can also be advisable in Sections 80D, 80GGA, 80G and 36(1)(ib).
Bad money owed needs to be deductible underneath part 57
The unhealthy money owed written off from the books of account is permitted as a deduction from the earnings taxable underneath the top ‘Profits and Gains from Business or Profession’. Whereas on the counterpart such a declare isn’t allowable whereas computing the earnings underneath the top ‘Income from different sources’.
According to Taxmann, the deductions allowable from the residuary earnings is laid out in part 57.
Taxmann’s suggestions for the Union Budget 2021
“Income from other sources is a residuary head of income and sweeps in all such taxable incomes which fall outside the other four heads of income. Section 57 specifically provides the list of expenditure which are allowed to be deducted from the income taxable under the head of other sources. Such discriminatory provision causes hardships to the assessee. Thus, it is recommended that deduction for bad debts shall be allowed under section 57 while computing the income from other sources,” Taxmann notes.
