CBDT Bars Income Tax Deduction on Expenditure Incurred to Settle Proceedings Related to Contraventions Under These Acts

The Central Board of Direct Taxes (CBDT) has barred income tax deduction on expenditure incurred to settle proceedings related to contraventions or defaults under SEBI Act, Competition Acts and Depositories Act.

The notification specifically states that such expenditure will not be considered as incurred “for the purpose of business or profession,” thereby disqualifying it from deduction. The laws mentioned under this notification include:

• The Securities and Exchange Board of India (SEBI) Act, 1992
• The Securities Contracts (Regulation) Act, 1956
• The Depositories Act, 1996
• The Competition Act, 2002

This directive stems from clause (iv) of Explanation 3 to sub-section (1) of Section 37 of the Income-tax Act, which pertains to disallowance of expenditures incurred in relation to unlawful acts or defaults.

Notification Details

Notification No. 38/2025

Date: 23/04/2025

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