Clause - 014 - Amendment of section 36.

THE FINANCE BILL, 2017

Clause 14 of the Bill seeks to amend section 36 of the Income-tax Act relating to other deductions.

The provisions of sub-clause (a) of clause (viia) of subsection (1) of the said section, inter alia, provide that a scheduled bank (not being a bank incorporated by or under the laws of a country outside India) or a non-scheduled bank or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, shall be allowed deduction in respect of provision for bad and doubtful debts. Further, the amount of such deduction is limited to seven and one-half per cent. of the amount of the total income (computed before making any deduction under the said clause and Chapter VIA) and an amount not exceeding ten per cent. of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner.

It is proposed to amend the provisions of said sub-clause so as to enhance the limit from seven and one-half per cent. to eight and one-half per cent. of the amount of the total income (computed before making any deduction under the said clause and Chapter VIA).

This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-2019 and subsequent years.

 

Provision for bad and doubtful debts limit increased, expanding allowable bank deduction for relevant assessment years. The amendment raises the deduction ceiling for provision for bad and doubtful debts under section 36(1)(viia)(a) from seven and one-half per cent to eight and one-half per cent of total income (computed before deductions under the clause and Chapter VIA), while retaining the separate ten per cent cap linked to aggregate average advances of rural branches; it applies to specified scheduled, non-scheduled and cooperative banks and takes effect from 1 April 2018 for assessment year 2018-19 onward.