Deductibility in respect of Gratuity Fund Section 40A(7), Employers contribution Section 40A(9), Income under Section 41.

 Provision for Gratuity Fund deduction under Section 40A(7)

As per Income Tax no provision is allowed for deduction in general, however in case of provision of Gratuity Fund it is allowed for deduction. The assessee can make provision for contribution toward approved gratuity fund but such provision should be actuarial provision.

Employer’s contribution towards fund Section 40A(9)

All notified funds under any Act than employers contribution is allowed as deduction under the Head Business and Profession. If the employer has contributed to the recognised provident fund, approved superannuation fund, approved gratuity fund or any similar fund under any other Act , such contribution is allowed only if payment is made on or before due date of filing of return of income as per section 43B. Any contribution made by the assessee toward any other fund which is unrecognised shall not be allowed as deduction.

Income under section 41

Any income which is  not business and profession income cannot have income under the head business/profession However as per section 41(1),412(2), 41(3),ans 41(4), such income shall be taxable under the head business/profession even if the assessee do not have any business/profession and are as under below

As per section 41(1):- Any income which was considered as expense before and was debited any amount to profit and loss account and subsequently it was recovered by the assessee such recovered amount shall be considered to be income of business and profession in that year.even if the assessee do not have any business or profession in that year.

Actual Cost of Depreciable Assets Sec.43(1)

As per section 43(1) Depreciation is calculated on actual cost of assets and actual cost means adding total expenses incurred to the cost of assets upto the date of putting the asset to use. Expenses can be Transportation charges, Loading and unloading expenses, Installation charges.

In case of subsidy received from the government, amount of subsidy should be deducted from actual cost.

Interest on assets

Any Interest on acquisition of assets before put to use shall be capitalized on actual cost of assets, However any interest on acquisition after acquisition shall not be included in the actual cost of such assets and will be debited to profit and loss account as it is revenue Expenditure.

Building in personal use subsequently used in Business/Profession

Where a building which was used before personal use and subsequently brought into use for the purpose  of the business or profession, the actual cost to the assessee shall be the actual cost of the building to the assessee, as reduced by an equal amount to the depreciation that would have been allowable had the building been used for the business/profession since the of its acquisition.

Where the assessee incurs any expenditure for acquition of any assets or part thereof in respect of which a payment or aggregate of payment made to a person in a day, otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electrinic clearing system through a bank account exceeds 10,000 Rs such Expenditure shall be ignored for the purpose of determination of actual cost.



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