## Other Deductions — Section 36
Section 36 lists a set of specific expenses that are deductible while computing business income. Learn them clause-by-clause.
### Insurance & employee benefits
| Clause | Deduction |
|---|---|
| 36(1)(i) | Stock insurance premium |
| 36(1)(ib) | Employee health insurance premium paid by employer — allowed only if paid other than in cash. (Insurance on P&M is allowed separately u/s 31.) |
| 36(1)(ii) | Bonus or commission paid to employees — provided it is not paid in substitute of dividend |
### Interest and discounts
- 36(1)(iii) — Interest on loan: Interest on borrowed capital used for business/profession is deductible. But if the loan financed acquisition of a fixed asset, interest up to the date the asset is first put to use is capitalised (added to Actual Cost) — Explanation 8 to Section 43(1). Interest after that date is revenue and deductible.
- 36(1)(iiia) — Discount on Zero Coupon Bonds (ZCB): Allowed pro-rata over the life of the bond.
- Deduction = Discount ÷ Life of bond (in months)
- Discount = Maturity Amount Payable − Issue Price Received
### Contributions to welfare funds
| Clause | Deduction |
|---|---|
| 36(1)(iv) | Employer's contribution to RPF / Superannuation Fund within limits — subject to 43B |
| 36(1)(iva) | Employer's contribution to NPS (u/s 80CCD), up to 14% of salary of the employee |
| 36(1)(v) | Employer's contribution to Approved Gratuity Fund — subject to 43B |
| 36(1)(va) | Employee's contribution collected by employer — deductible only if remitted to the fund within the due date under the relevant fund's Act. First treated as income u/s 2(24)(x). Section 43B never applies here. |
> Salary for 36(1)(iva) = Basic + DA (for retirement benefits) + Commission (as a % of turnover).
### Bad debts — 36(1)(vii) read with 36(2)
Bad debts are deductible if they relate to the business. Two circumstances:
1. Written off in books — allowed only if actually written off AND the debt was earlier considered as income in the current or an earlier PY.
2. Irrecoverable (ICDS): Even if not recognised in books but recognised for tax purposes in the current/earlier year (ICDS vs accounting standard conflict).
Types of bad debts: (a) trade receivables not recoverable; (b) loans given by a money-lending business.
If the A.O. disallows part of the claim (36(2)): the balance becomes deductible in the year of final settlement with the customer.
### Recovery of bad debts — Section 41(4)
When a previously written-off debt is recovered, it is taxable under PGBP in the year of recovery — but only to the extent of the excess of amount recovered over net deduction (whether or not the business still exists).
- Taxable Amount = Amount Recovered − Net Deduction
- Net Deduction = Debt Claimed − Deduction Disallowed by A.O.
- Not taxable if a successor recovers it.
### Family planning expenditure — 36(1)(ix)
- Available only to companies.
- Revenue expenditure on promoting family planning among employees → fully allowed.
- Capital expenditure → allowed in 5 instalments from the year of expenditure.
- Unabsorbed family-planning expenditure is treated like unabsorbed depreciation.
- Profit/loss on sale of the related asset is treated like that of a scientific-research asset.
### Transaction taxes
| Clause | Deduction |
|---|---|
| 36(1)(xv) | Securities Transaction Tax (STT) paid on taxable securities transactions |
| 36(1)(xvi) | Commodities Transaction Tax (CTT) on taxable commodity transactions (e.g., non-agricultural commodity derivatives) |