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Questions and Answers
For businesses involved in tea, coffee, or rubber development, what is the maximum deduction allowed under Section 33AB of the Income Tax Act?
For businesses involved in tea, coffee, or rubber development, what is the maximum deduction allowed under Section 33AB of the Income Tax Act?
- The actual amount deposited into the development account.
- Whichever is lower: the actual amount deposited or 40% of the business profits before the deduction. (correct)
- Whichever is higher: the actual amount deposited or 40% of the business profit before the deduction.
- 40% of the business profits before any deductions under this section.
Under Section 33ABA, what condition must be met by an assessee to be eligible for deductions related to the Site Restoration Fund?
Under Section 33ABA, what condition must be met by an assessee to be eligible for deductions related to the Site Restoration Fund?
- The business must have a turnover exceeding ₹10 crore.
- The business must be engaged in manufacturing activities.
- The business must be involved in prospecting for, extracting, or producing petroleum or natural gas in India, with an agreement with the Central Government. (correct)
- The business must be a registered MSME.
According to Section 35AD, what is the permissible deduction concerning capital expenditure for specified businesses?
According to Section 35AD, what is the permissible deduction concerning capital expenditure for specified businesses?
- 50% of the capital expenditure incurred.
- The entire capital expenditure incurred wholly and exclusively for the specified business. (correct)
- The amount of capital expenditure is allowable, capped at ₹ 1 crore.
- 20% of the capital expenditure, spread equally over 5 years.
Under Section 35D, what portion of specified preliminary expenses is allowed as a deduction each year for the first five successive years?
Under Section 35D, what portion of specified preliminary expenses is allowed as a deduction each year for the first five successive years?
As per Section 35E, what is the amortization period for qualifying expenditure related to prospecting for certain minerals?
As per Section 35E, what is the amortization period for qualifying expenditure related to prospecting for certain minerals?
According to Section 36(1)(viii), what is the maximum percentage of profits that can be carried to a special reserve account by a financial corporation to be eligible for deduction?
According to Section 36(1)(viii), what is the maximum percentage of profits that can be carried to a special reserve account by a financial corporation to be eligible for deduction?
For claiming deductions under sections 33AB, 33ABA, 35D and 35E, who is required to audit the accounts of the assessee?
For claiming deductions under sections 33AB, 33ABA, 35D and 35E, who is required to audit the accounts of the assessee?
Which of the following expenses related to setting up a business are eligible for amortization under Section 35D?
Which of the following expenses related to setting up a business are eligible for amortization under Section 35D?
In Assessment Year 2024-2025, what change was introduced in Section 35D regarding the preparation of feasibility reports, project reports, market surveys, or engineering services?
In Assessment Year 2024-2025, what change was introduced in Section 35D regarding the preparation of feasibility reports, project reports, market surveys, or engineering services?
Under Section 35E, if the income from commercial exploitation of mineral deposits is lower than 1/10th of the qualifying expenditure, what amount is deductible?
Under Section 35E, if the income from commercial exploitation of mineral deposits is lower than 1/10th of the qualifying expenditure, what amount is deductible?
Flashcards
Section 33AB Deduction
Section 33AB Deduction
Deduction for businesses involved in tea, coffee, or rubber development. The deduction is the lower of the amount deposited or 40% of the business profits.
Section 33ABA Deduction
Section 33ABA Deduction
Deduction for businesses involved in prospecting, extraction, or production of petroleum or natural gas where an agreement with the central government exists. The deduction is the lower of the amount deposited in a site restoration scheme or 20% of the business profits.
Section 35AD Deduction
Section 35AD Deduction
Allows a deduction for the whole of any expenditure of a capital nature incurred wholly and exclusively for the purposes of any specified business.
Section 35D Deduction
Section 35D Deduction
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Section 35E Deduction
Section 35E Deduction
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Section 36(1)(viii) Deduction
Section 36(1)(viii) Deduction
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Study Notes
- Strategic tax planning during business establishment involves understanding deductions based on the nature of the business.
- The Income Tax Act offers several deductions for businesses, with a focus on Assessment Years 2021-2022 through 2024-2025.
Tea, Coffee, and Rubber Development Account (Section 33 AB)
- This section provides a deduction for businesses involved in the cultivation and production of tea, coffee, and rubber.
- The deductible amount is the lower of the amount deposited in the development account or 40% of the business profits before this deduction.
- An audit is required per Section 44 AB, with a report furnished by the specified date as per Section 288.
- There were no changes across assessment years 2022-2023, 2023-2024, and 2024-2025.
Site Restoration Fund (Section 33 ABA)
- Applies to businesses involved in prospecting, extracting, or producing petroleum or natural gas in India, with an agreement with the Central Government.
- Deduction involves depositing an amount with SBI in a scheme approved by the Ministry of Petroleum and Natural Gas or in a Site Restoration Account.
- The deduction is the lower of the amount deposited or 20% of the business profits before this deduction.
- An audit is required per Section 44 AB standards, as defined Section 288.
- There were no changes across assessment years 2022-2023, 2023-2024, and 2024-2025.
Specified Business Eligible for Deduction of Capital Expenditure (Section 35 AD)
- Allows a deduction for the entirety of capital expenditure incurred wholly and exclusively for specified businesses.
- The deduction is applicable in the previous year in which the expenditure was incurred.
- There were no changes across assessment years 2022-2023, 2023-2024, and 2024-2025.
Amortization of Certain Preliminary Expenses (Section 35D)
- Allows deduction of 1/5th of specified preliminary expenses over five successive previous years.
- Eligible expenses include costs for feasibility reports, project reports, market surveys, engineering services, and legal charges related to business setup.
- For companies, expenses such as drafting MoA/AoA, printing charges, registration fees, and costs related to public issue of shares/debentures are included.
- If the aggregate expenditure exceeds 5% of the project cost or capital employed, the excess is ignored for deduction purposes.
- Audit is required as defined by Section 288, before the specified date referred to in section 44 AB.
- For A.Y. 2024-2025, there's an amendment requiring the assessee to furnish a statement containing particulars of expenditure within a specified period, to a prescribed income-tax authority, in a prescribed form and manner.
Expenditure on Prospecting for Certain Minerals (Section 35E)
- Qualifying expenditure is amortized in equal installments over 10 years.
- The deductible amount each year is the lower of 1/10th of the qualifying expenditure or the income from commercial exploitation of minerals.
- Audit is required as defined by Section 288 before the specified date referred to in section 44 AB.
- There were no changes across assessment years 2022-2023, 2023-2024, and 2024-2025.
Special Reserve Created by a Financial Corporation (Section 36(1)(viii))
- Allows a deduction for special reserves created by specified entities, up to 20% of the profits derived from eligible business before this deduction.
- There were no changes across assessment years 2022-2023, 2023-2024, and 2024-2025.
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