Live Course on Drafting of Appeal and Reply of Penalty Notice by CA Sachin Sinha. Register Now!!

DEBTORS WRITTEN OFF

05 March 2022

In balance sheet from 4 years debtors are out standing which amount not received in future what provision in income tax and how to written off

Reply
Follow
Share

10 Replies

prasad Nilugal ( GST Practitioner & Accounts ) (14215 Points)
Replied 05 March 2022

As far as Income tax act is concerned , deduction under Income tax is allowed under certain conditions .

pass entry

Bad Debts A/c Dr
To Trade Debtor's A/c Cr
( Bad debts written off )

Before write off , please discuss with your company CA or other professionals CA .

Eswar Reddy S (CFO- at NHTF) (58213 Points)
Replied 05 March 2022

Enter the journey voucher as

Bad Debts A/c Dr

To Trade Receivables / Debtors

If it is huge amount then shift the part of the amount to upcoming financial year

sabyasachi mukherjee (26197 Points)
Replied 06 March 2022

Where is the entry of provision for doubtful debts?
In Income Tax only banks are allowed deduction for doubtful debts.

Eswar Reddy S (CFO- at NHTF) (58213 Points)
Replied 06 March 2022

Bad debts written off allowed for all

CA Surya Sekar (CFO ) (1347 Points)
Replied 06 March 2022

Provision for Bad and Doubtful Debts

As per section 36(1)(viia) of the Income Tax Act, 1961 only banks and financial institutions are allowed deduction in respect of the provisions made for bad and doubtful debts. No other assessee is allowed to claim the

Eswar Reddy S (CFO- at NHTF) (58213 Points)
Replied 06 March 2022

Refer Circular 122016. When trade receivables are became bad then those are directly written off as bad debts ..

Only banking entities requires provisions, why others require provisioning like standard , substandard , doubtful / bad , loss assets ?

Refere 36(1)(vii) of income tax act read with section 36(2)

sabyasachi mukherjee (26197 Points)
Replied 06 March 2022

Only banks can avail deduction of provisioning others not.Provision of debtors in all cases is an important aspect to ascertain the true and fair position of debtors.

Eswar Reddy S (CFO- at NHTF) (58213 Points)
Replied 06 March 2022

Bad Debts doesn't require provisions..If it's completely written off as bad then what is the need for provision ?

Burden of proof wi be on the assessee..They can prove it if there is assessment..

sabyasachi mukherjee (26197 Points)
Replied 07 March 2022

First place your query correctly.Its wrong. Bad debts are charged off to pl.
First know the process.

sadashiv Rupchand Gaikwad (Proprietor) (521 Points)
Replied 07 March 2022

Bad debts are allowed ,Only banking companies and subject to rural advance as per RBI Master circular, Bad debts more than Rs 1 lacs with PAN reporting in ITR is must