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of <h1>Income Tax Bill 2025: Clause 36 Tightens Rules on Business Expense Deductions, Updates Section 40A for Transparency</h1> Clause 36 of the Income Tax Bill, 2025, aims to prevent tax evasion by disallowing the deduction of excessive or unreasonable business expenses. It targets payments to 'specified persons,' such as relatives and partners, ensuring they align with fair market values and actual business needs. Payments exceeding Rs. 10,000 not made through banking channels are disallowed, promoting transparency. The clause updates and refines Section 40A of the Income Tax Act, 1961, by providing detailed definitions, modernizing payment modes, and offering more flexibility for exceptions. This provision emphasizes the importance of banking transactions to ensure compliance and transparency in tax practices.
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