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Bad debt deduction rules for banks and financiers clarified, linking provision limits, write off conditions and recovery adjustments. Section 31 allows deductions for provisions and for bad debts written off, subject to category-specific ceilings for banks, financial institutions and non banking financiers, and requires a single provision account for all advances. Deductions for write offs are permitted in the year of write off if previously taken into account in income or arising from ordinary lending; recoveries adjust prior deductions. For assessees under the provision limits, only amounts exceeding the provision account credit balance are deductible and write offs must be debited to that account. Provisions are not treated as write offs, and recognized accounting or disclosure standards can deem amounts as written off for deduction purposes.
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Bad debt deduction rules for banks and financiers clarified, linking provision limits, write off conditions and recovery adjustments.
Section 31 allows deductions for provisions and for bad debts written off, subject to category-specific ceilings for banks, financial institutions and non banking financiers, and requires a single provision account for all advances. Deductions for write offs are permitted in the year of write off if previously taken into account in income or arising from ordinary lending; recoveries adjust prior deductions. For assessees under the provision limits, only amounts exceeding the provision account credit balance are deductible and write offs must be debited to that account. Provisions are not treated as write offs, and recognized accounting or disclosure standards can deem amounts as written off for deduction purposes.
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