-Allowances under PGBP
Depreciation (Section 32)
Normal Depreciation: Allowed on tangible & intangible assets as per prescribed rates.
Additional Depreciation:
o 20% additional depreciation for new machinery used in manufacturing.
o 35% for notified backward areas.
Investment Allowance (Section 32AD)
15% of investment in new plant & machinery for notified backward states.
Expenditure on Scientific Research (Section 35)
100% deduction for in-house R&D expenses.
100% deduction for donations to scientific research institutions.
Amortization of Preliminary Expenses (Section 35D)
Deductible over 5 years (Max 5% of cost of project).
Expenditure on Agri-Extension Projects (Section 35CCC)
100% deduction on notified agricultural extension projects.
Deduction for Expenditure on Skill Development (Section 35CCD)
100% deduction for notified skill development projects.
Expenditure on Specified Businesses (Section 35AD)
100% deduction for capital expenses on certain businesses (e.g., cold storage,
warehousing, hospitals, fertilizers, hotels, etc.).
Rent, Salaries, and Other Expenses (Section 37(1))
All revenue expenses wholly and exclusively for business are allowed, except capital
and personal expenses.
Bad Debts Written Off (Section 36(1)(vii))
Allowed if written off in books of accounts.
Employer’s Contribution to Provident Fund / ESI (Section 36(1)(iv))
Allowed if paid before due date of filing ITR.
Interest on Borrowed Capital (Section 36(1)(iii))
Allowed for capital borrowed for business.
Compensation to Employees (Section 37(1))
Deductible if paid for business purposes.
Family Planning Expenditure (Section 36(1)(ix))
Allowed only for companies.
Disallowances under PGBP
Cash Payments Exceeding ₹10,000 (Section 40A(3))
Any expenditure > ₹10,000 made in cash (other than banking modes) is disallowed.
Excessive Payments to Relatives (Section 40A(2))
If paid to relatives & is unreasonable, the excess portion is disallowed.
Payment of Taxes (Section 40(a)(ii))
Interest, Salary, Bonus to Partners (Section 40(b))
Allowed only as per Partnership Deed and subject to limits.
Disallowance for Non-Deduction of TDS (Section 40(a)(ia))
If TDS is not deducted/deposited, 30% of expenditure is disallowed.
Disallowance of Provident Fund Contribution (Section 43B)
Employee contribution must be deposited before due date. Otherwise, disallowed.
Disallowance of Corporate Social Responsibility (CSR) Expenditure (Section 37(1))
Penalty and Fines (Section 37(1))
Any penalty or fine imposed for violation of the law is disallowed.
Expenditure Related to an Offense (Section 37(1))
Any illegal business expenditure is disallowed.
Conversion of Capital Asset to Stock-in-Trade (Section 45(2))
Expenses Incurred on Political Contributions (Section 37(2B))
Expenditure for Personal Purposes (Section 37)
