Ensuring Fair Tax Practices: An Analysis of Clause 36 in the Income Tax Bill, 2025 vs. Section 40A of the Income Tax Act, 1961

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.... Tax Bill, 2025, introduces provisions regarding the non-deductibility of certain expenses or payments under the head "Profits and Gains of Business or Profession." This clause is significant as it aims to prevent the deduction of excessive or unreasonable expenses, ensuring that only genuine business expenses are deductible. This provision is crucial in maintaining the integrity of tax computatio....

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....reasonable. The criteria include fair market value, business needs, and benefits derived. - The definition of "specified person" is detailed in Subsection (3), covering relatives, directors, partners, and entities with substantial interest in the business. 2. Payments Exceeding Thresholds Not Made Through Banking Channels: - Subsection (4) disallows deductions for payments exceeding Rs. 10,00....

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....at payments to specified persons are justified and within reasonable limits. The emphasis on banking transactions necessitates robust financial practices and documentation. Non-compliance could result in increased tax liabilities and potential penalties. Comparative Analysis with Section 40A of the Income Tax Act, 1961 Clause 36 of the Income Tax Bill, 2025, shares similarities with Section 40A ....