Income Tax Act, 1961
Section 4: Ins. by Act 11 of 1987, s. 9 (w.e.f. 11988).
4. Ins. by Act 11 of 1987, s. 9 (w.e.f. 11988).
5. Subs. by Act 4 of 1988, s. 11, for “any debt, or part thereof, which is established to have become a bad debt in the
previous year” (w.e.f. 11989).
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1[Provided that in the case of 2[an assesse] to which clause (viia) applies, the amount of the deduction
relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof
exceeds the credit balance in the provision for bad and doubtful debts account made under that clause:]
3[Provided further that where the amount of such debt or part thereof has been taken into account in
computing the income of the assessee of the previous year in which the amount of such debt or part
thereof becomes irrecoverable or of an earlier previous year on the basis of income computation and
disclosure standards notified under sub-section (2) of section 145 without recording the same in the
accounts, then, such debt or part thereof shall be allowed in the previous year in which such debt or part
thereof becomes irrecoverable and it shall be deemed that such debt or part thereof has been written off as
irrecoverable in the accounts for the purposes of this clause.]
4[5[Explanation1].—For the purposes of this clause, any bad debt or part thereof written off as
irrecoverable in the accounts of the assessee shall not include any provision for bad and doubtful debts
made in the accounts of the assessee;]
6[Explanation 2.—For the removal of doubts, it is hereby clarified that for the purposes of the proviso
to clause (vii) of this sub-section and clause (v) of sub-section (2), the account referred to therein shall be
only one account in respect of provision for bad and doubtful debts under clause (viia) and such account
shall relate to all types of advances, including advances made by rural branches;]
7[(viia) 8[in respect of any provision for bad and doubtful debts made by—
(a) a scheduled bank [not being 9*** a bank incorporated by or under the laws of a country
outside India] or a non-scheduled bank 10[or a co-operative bank other than a primary agricultural
credit society or a primary co-operative agricultural and rural development bank], an amount 11[not
exceeding 12[eight and one-half per cent.]] of the total income (computed before making any
deduction under this clause and Chapter VIA) and an amount not exceeding 13[ten per cent.] of the
aggregate average advances made by the rural branches of such bank computed in the prescribed
manner:
14[Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at
its option, be allowed in any of the relevant assessment years, deduction in respect of any provision
made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in
accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent
of the amount of such assets shown in the books of account of the bank on the last day of the previous
year:]
applies, the amount of the deduction
relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof
exceeds the credit balance in the provision for bad and doubtful debts account made under that clause:]
3[Provided further that where the amount of such debt or part thereof has been taken into account in
computing the income of the assessee of the previous year in which the amount of such debt or part
thereof becomes irrecoverable or of an earlier previous year on the basis of income computation and
disclosure standards notified under sub-section
of section 145 without recording the same in the
accounts, then, such debt or part thereof shall be allowed in the previous year in which such debt or part
thereof becomes irrecoverable and it shall be deemed that such debt or part thereof has been written off as
irrecoverable in the accounts for the purposes of this clause.]
4[5[Explanation1].—For the purposes of this clause, any bad debt or part thereof written off as
irrecoverable in the accounts of the assessee shall not include any provision for bad and doubtful debts
made in the accounts of the assessee;]
6[Explanation 2.—For the removal of doubts, it is hereby clarified that for the purposes of the proviso
to clause
of this sub-section and clause
of sub-section
and such account
shall relate to all types of advances, including advances made by rural branches;]
7[
8[in respect of any provision for bad and doubtful debts made by—
a scheduled bank [not being 9*** a bank incorporated by or under the laws of a country
outside India] or a non-scheduled bank 10[or a co-operative bank other than a primary agricultural
credit society or a primary co-operative agricultural and rural development bank], an amount 11[not
exceeding 12[eight and one-half per cent.]] of the total income (computed before making any
deduction under this clause and Chapter VIA) and an amount not exceeding 13[ten per cent.] of the
aggregate average advances made by the rural branches of such bank computed in the prescribed
manner:
14[Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at
its option, be allowed in any of the relevant assessment years, deduction in respect of any provision
made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in
accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent
of the amount of such assets shown in the books of account of the bank on the last day of the previous
year:]