The Evolution of Business Expenditure Deductions: Insights from Clause 34 of the Income Tax Bill, 2025 vs. Section 37 of the Income Tax Act, 1961

Business expenditure deductions: exclusions tightened to bar CSR, political ads, and payments tied to unlawful conduct.

Clause 34 requires that only expenditures incurred wholly and exclusively for business purposes, not of a capital or personal nature and not falling within specified exclusions, are deductible. It expressly disallows deductions for expenditures linked to offenses or prohibited activities, corporate social responsibility obligations, and political-advertisement costs, and clarifies that benefits, perquisites, compounding payments, and settlements related to unlawful conduct are non-deductible.