drawings /capital

This query is : Resolved

SSA JI (Querist)
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21 May 2008 In case of maintaining the boks of accounts of an Individual the income tax , life insurance ,and bank charges added or substract from the capital or otherwise drawings , would u please tell me what is the basic concept and reason behind this kind of treatment ?

Shyam Lal Naik

Shyam Lal Naik (Expert)
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21 May 2008 These are non deductible personal expenditure in nature.

Basic concept - Business entity concept

CA Anuj Garg

CA Anuj Garg (Expert)
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21 May 2008 basically income tac is charged on business income and for calculating it only related exp are allowed to set off.

and as per Business Entity Concept owner and busines are seprate things

CA. Vineet Grover

CA. Vineet Grover (Expert)
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21 May 2008 Hi Davinder,

As the bank charges is an allowable expenses in the books of the individual as per income tax law and should appear in the P&L a/c.

Drawings are not allowable expenses as per income tax law in the boooks of the individual, hence the same is shown as a deduction from Capital.

Rgds/
Vineet