Tax Dept Tightens Grip on Settlements Under Four Key Laws

The income tax department announced that deductions for expenses related to settlements under four laws including the SEBI and Competition Acts will no longer be allowed. The CBDT's notification clarifies that such expenditures won't qualify as business-related and, therefore, won't be eligible for deductions.

The income tax department has introduced stricter regulations, ruling out deductions for expenses incurred in settling proceedings under four significant laws. These include the SEBI Act, Securities Contracts Act, Depositories Act, and the Competition Act.

As per the Central Board of Direct Taxes (CBDT), a notification issued on April 23 makes it clear that expenditures tied to contraventions or defaults associated with these laws cannot be categorized as business expenses.

This change means that taxpayers will no longer be able to claim deductions or allowances related to such settlement costs. The updated regulations aim to ensure compliance with the specified laws and enhance transparency in financial practices.

(With inputs from agencies.)