{"id":4677,"date":"2021-06-10T11:39:40","date_gmt":"2021-06-10T11:39:40","guid":{"rendered":"https:\/\/www.kanakkupillai.com\/new-learn?p=4677"},"modified":"2025-07-23T16:21:39","modified_gmt":"2025-07-23T10:51:39","slug":"deductions-and-disallowances-under-section-36","status":"publish","type":"post","link":"https:\/\/www.kanakkupillai.com\/learn\/deductions-and-disallowances-under-section-36\/","title":{"rendered":"Deductions and Disallowances under Section 36 of the Income Tax Act, 1961"},"content":{"rendered":"

Businesses, professionals, and even cooperative societies incur various costs in the course of running their operations. Section 36 of the Income Tax Act, 1961, lists specific expenses, including insurance premiums, employee bonuses, interest on loans, bad debts, and contributions to employee welfare funds that a taxpayer can deduct from their business or professional income<\/a> while calculating taxable profits. These deductions are intended to provide relief for genuine business-related costs incurred during the financial year.<\/p>\n

In this blog, we will understand the permissible deductions allowed under Section 36 of the Income Tax Act, 1961<\/p>\n

List of Deductible Expenses under Section 36<\/h2>\n

1. Insurance Premium for stocks: <\/strong>If your business pays insurance to protect goods, stock-in-trade, or raw materials from fire, theft, or any other damage, then that premium is a deductible business expense.<\/p>\n

2. An insurance premium paid on the life of cattle being livestock:<\/strong>\u00a0The amount of any premium paid by a federal milk co-operative society to effect or to keep in force an insurance on the life of the cattle owned by a member of a co-operative society, being a primary society engaged in supplying milk raised by its members to such federal milk co-operative society;<\/p>\n

3. Insurance premium paid by employer to employee: <\/strong>If you pay a premium for your employee\u2019s health, accident, or term insurance policy, you can claim it as a deduction, provided the payment is not in cash.<\/p>\n

4. Bonus, commission to employees:<\/strong>\u00a0Bonuses or commissions paid to employees for their services are allowed as deductions, as long as they are genuine and not a way of distributing profits in disguise.<\/p>\n

5. Interest on Loan: <\/strong>Interest paid on loans taken for business or professional purposes is allowed, whether the loan is from a bank, NBFC, or even a private lender. But if the loan is used for personal expenses, the interest cannot be claimed.<\/p>\n

6. Discount on Zero Coupon Bonds: <\/strong>Businesses that issue zero-coupon bonds (bonds that don\u2019t pay regular interest but are redeemed at a higher value) can deduct a portion of the discount every year till maturity.<\/p>\n

What is a Zero-Coupon Bond?<\/strong><\/p>\n

A zero-coupon bond is a special type of loan instrument.<\/p>\n