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Business Deductions

Business Deductions & Depreciations: -

To ascertain the actual Business Profit the expenses and losses are deducted.

This article helps you to compute the Business Income and brief introduction to the deductible business expenses and losses.

Deductions u/s 30 to 38 [Except section 37(2)]

Rent, Taxes, Repairs and Insurance for Buildings
Plant and Machinery - Repairs & Insurance
Depreciation for Vehicles, Plant & Machinery, Buildings etc.,
Deductible Expenses for Scientific Research
Deductible Expenses for Acquisition of Patents, Copyrights, Licence etc.,
Amortization of Expenses

Steps to Calculate Business Income

Computation of Income from Business or Profession: -

If regular books of accounts have been maintained and Profit and Loss Account has been prepared, then the computation would be as under: -

Net Profit as per Profit and Loss Account		xxx
Add: Inadmissible Expenses debited to Profit and Loss Account		xxx
Deemed Incomes not credited to Profit and Loss Account		xxx ---
		xxx
Less: Deductible Business Expenses not debited to Profit and Loss Account	xxx
Incomes chargeable under other heads credited to Profit and Loss Account	xxx ---
		xxx ---
Profits and Gains of Business or Profession		xxx ---

The above computation requires further adjustments for different entities like Association of Persons (including Trusts), Firms & Companies.

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Business Deductions u/s 30,31 & 38

Deductible Business Expenses: -

The following list provides the deductible business expenses under sections (30, 31 & 38).

Rent, Rates, Taxes and Repairs and insurance for Buildings (SECTIONS 30 & 38)

Where the premises are occupied by the assessee as a tenant: -

Rent paid by him.
Repairs borne by him.
Land revenue, local rates and municipal taxes.
Insurance premium paid for risk against damage or destruction.

Where the premises are occupied by the assessee not as a tenant: -

Current repairs incurred.
Land revenue, local rates and municipal taxes.
Insurance premium paid for risk against damage or destruction.

With effect from Assessment Year 2004-2005, Repairs or Current Repairs, shall not include any expenditure, in the nature of Capital Expenditure.

Premises Not Exclusively used for Business: -

In case of rent, the proportionate annual value of the premises used for Business purpose will be deductible.

In the case of any other expenditure mentioned above, the proportionate amount paid by the assessee for the purpose of business or profession will be deductible.

Business Deductions for Repairs and Insurance of Machinery, plant and Furniture (SECTIONS 31 & 38)

Amount paid on current repairs and insurance premium against risk of damage or destruction on machinery, plant and furniture are eligible for deduction.

In the case machinery, plant and furniture are not exclusively used for the purpose of business or profession, then such proportionate amount spent by the assessee for Business is eligible for deduction.

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Business Deductions - Depreciations

Depreciation can be claimed at such percentage prescribed on the written down value (WDV) of the block of assets being tangible or intangible assets.

Such intangible assets should have been acquired on or after 01.04.1998.

In the case of Power Sector, the depreciation can be claimed at such percentage on actual cost thereof to the assessee, in respect of assets acquired on or after 01.04.1997.The aggregate of business deductions by way of depreciation shall not exceed the actual cost.

S.No	Description of Asset	Rate of Depreciation %
1	Buildings (including roads, bridges, culverts & wells)	10
2	Residential Buildings (except Hotels and Boarding Houses)	5
3	For Hotels and Boarding Houses	10
4	Buildings acquired on or after 01.09.2002 for installing machinery or plant Water supply project Water treatment system For business of providing infrastructure facilities under section 80-IA(4)(i) Purely temporary erections such as Wooden Structures	100
5	Other Buildings	10
6	Furniture and Fittings (including Electrical Fittings)	10
7	General Plant and Machinery	15
	Aeroplane and Aero-Engines	40
	Books of Persons carrying on profession Annual Publications Other Books	100 60
	Books for running lending libraries	100
	Computers including Software	60
	Containers made up of glass or plastic used as notified	50
	Life saving medical periperals.	40
	P & M used in Semi-Conductor Industry including all Integrated Circuits (ICs).	30
	Ships.	20
	Textile Industry.	50
	Moulds used in Rubber and Plastic Goods factories	30
	Pollution control euipments (Air, Solid Waste, Water)	100
	Wooden parts used in artificial silk manufacturing machinery	100
	Cinematograph Films - Bulbs of studio lights	100
	Match factories - Wooden match frames	100
	Mines and quarries - tubs winding ropes, haulage ropes, sand stowing pipes and safety lamps	100
	Salt works - Salt pans, reservoirs and condensors etc.	100
8	Ships including speed boat	15
9	Motor cars Used in Business running them on hire Others	30 15
	New Commercial Vehicles (acquired from 01.04.2001 to 31.03.2002) and put to use in the year of acquisition.	40
	New Commercial Vehicles (acquired from 01.04.2001 to 31.03.2002) and put to use in the year of acquisition.	50
	New Commercial Vehicles (acquired from 01.10.1998 to 31.03.2000) and put to use in the year of acquisition.	60
10	Intangible Assets Know-how Patents Copyrights Trademarks Licences Franchises Commercial Rights of similar nature	25

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