Section 32 — Other deductions

The following amounts shall be allowed as deduction in computing income
chargeable under section 26:—
( a) bonus or commission paid to an employee for services rendered, but
only when such amount would not have been payable to the employee
as profits or dividend if it had not been paid as bonus or commission;
( b) interest paid in respect of capital borrowed for the purposes of
business or profession, where—
( i) such interest shall not include interest on capital borrowed for
acquisition of an asset, whether capitalised in the books of
account or not, for any period beginning from the date the capital
was borrowed for acquisition of the asset till the date that asset
was first put to use;
( ii) recurring subscriptions paid periodically by shareholders or sub -
scribers in Mutual Benefit Societies fulfilling the conditions as may
be prescribed, shall be deemed to be capital borrowed;
( c) contribution paid by a public financial institution to the credit guaran-
tee fund trust for small industries as the Central Government may, by
notification, specify;
( d) the pro rata amount of discount on a zero coupon bond having regard
to the period of life of such bond calculated in the manner, as may be
prescribed, where—
( i) “discount” means the difference between the amount received or
receivable by the infrastructure capital company or infrastructure
capital fund or public sector company or scheduled bank issuing
the bond, and the amount payable on maturity or redemption of
such bond;
( ii) “period of life of bond” means the period commencing from the
date of issue of the bond and ending on the date of the maturity or
redemption of such bond;
( e) the amount carried to a special reserve created and maintained by a
specified entity, subject to the following conditions:—
( i) such amount shall not exceed 20% of the profits derived from an
eligible business computed under the head “Profits and gains of
business or profession” before any deductions under this clause;
and
( ii) when the aggregate of such amounts carried to such reserve account
from time to time exceeds twice the amount of paid-up share capital
and of general reserves of the specified entity, no deduction shall
be allowable on such excess,
and for the purposes of this clause,—
( A) “specified entity” means—
( I) a public financial institution as specified in section 2( 72) of
the Companies Act, 2013 (18 of 2013);
( II) a financial corporation which is a public sector company;
( III) a banking company;
( IV) a co-operative bank other than a primary agricultural credit
society or a primary co-operative agricultural and rural
development bank;
( V) a housing finance company; and
( VI) any other financial corporation including a public com-
pany;
( B) “eligible business” means,—
( I) in respect of any of the specified entities referred to in clause
(e)(A)(I) to (IV), the business of providing long-term finance
for—
( a) industrial or agricultural development;
( b) development of infrastructure facility in India; or
( c) development of housing in India;
( II) in respect of the specified entity referred to in clause (e)(A)(V),
the business of providing long-term finance for the construc-
tion or purchase of houses in India for residential purposes;
and
( III) in respect of the specified entity referred to in clause (e)(A)(VI),
the business of providing long-term finance for development
of infrastructure facility in India;
( C) “infrastructure facility” means—
( I) an infrastructure facility as defined in Explanation to section
80-IA(4)(i) of the Income-tax Act, 1961 (43 of 1961) or any
other public facility of a similar nature as may be notified by
the Board in this behalf and which fulfils the conditions as
may be prescribed;
( II) an undertaking referred to in section 80-IA(4)( ii) or ( iii) or
(iv) or (vi) of the Income-tax Act, 1961 (43 of 1961); and
( III) an undertaking referred to in section 80-IB(10) of the
Income-tax Act, 1961 (43 of 1961);
( f) any expenditure, not being capital expenditure, incurred by a corporation
or a body corporate, by whatever name called, if,—
( i) it is constituted or established by a Central Act or State Act or
Provincial Act;
( ii) it is notified by the Central Government for the purposes of this
clause having regard to the objects and purposes of the Act referred
to in sub-clause (i); and
( iii) the expenditure is incurred for the objects and purposes authorised
by the Act under which it is constituted or established;
( g) the expenditure incurred by a co-operative society engaged in the business
of manufacture of sugar, on purchase of sugarcane at a price equal to or
less than the price fixed or approved by the Government;
( h) marked to market loss or other expected loss as computed as per the
income computation and disclosure standards notified under section
276(2);
( i) any expenditure bona fide incurred by a company for the purpose of pro-
moting family planning amongst its employees, subject to the following
conditions:—
( A) if such expenditure or any part of it is of capital nature, one-fifth
of it shall be deducted for the tax year in which it was incurred and
the balance shall be deducted in equal instalments for each of the
four immediately succeeding tax years;
( B) the provisions of sections 33(11) and 112(3) shall apply to
deduction under this clause as they apply in relation to deductions
allowable in respect of depreciation;
( C) the provisions of sections 38(1)( c), 39(4) (Table: Sl. No. 9), 45(6)
and (10), shall apply to an asset representing capital expenditure
for promoting family planning, to the extent they apply to an asset
representing capital expenditure on scientific research;
( j) the amount being difference between the actual cost of animals used
for the purposes of the business or profession otherwise than as stock-
in-trade and the amount realised from the carcasses or animals, where
such animals have died or become permanently useless; and
( k) the amount paid as securities transaction tax or commodities trans -
action tax, if—
( i) the taxable securities transactions or taxable commodities trans -
actions are entered into the course of the business during the tax
year; and
( ii) the income arising from such taxable securities transactions or
taxable commodities transactions is included in the income
computed under the head “Profits and gains of business or pro -
fession”.