Question

What deductions are allowed to a businessman in computing profit specify the expenses disallowed?

Answer 1

Answer:

Any interest, royalties, fees for technical services or other sum allowable as an expense, which is payable, outside India; or in India to a non-resident, or a foreign company, for which TDS is applicable but not deducted or after deduction, has not been paid during the previous year, or before due date u/s 200(1).

Answer 2

Explanation:

While computing the profit and gains from business or profession, there are certain expenditures which are disallowed. This means that the income tax department does not allow the benefit of such expenditures and the assesses are required to pay taxes on such expenditures by adding it back to the net profits. There are two primary reasons for disallowance of any expenditure:

The tax amount required to be deducted on certain expenditures are not deducted while making the payment.

The expenditure does not implicitly relate to the conduct of such business or profession;

Any expenditure which is disallowed attracts the tax at 30% rate (25% in case of certain companies) but alongside, interest, penalty, and prosecution provisions are also triggered.