Tax implication of time barred debt
This query is : Resolved
02 December 2011
Respected sir,
Shall if the particular debt is barred by law, i am heard that it can be deemed as income and consequently income tax can be claimed in that regard. Whether the above contend is true and if it is means under what provisions of income tax act it is taxed.
under the section 68 of Income tax act,unexplained credit is taxed whether the provision would apply in respect of unpaid creditors.
Shall if the particular debt is barred by law, i am heard that it can be deemed as income and consequently income tax can be claimed in that regard. Whether the above contend is true and if it is means under what provisions of income tax act it is taxed.
under the section 68 of Income tax act,unexplained credit is taxed whether the provision would apply in respect of unpaid creditors.
02 December 2011
If the debt is time barred, you will tranfer it in profit & loss account by following entry
Creditors A/c Dr
To Profit & Loss A/c
It will be taxed u/s 41 i.e deemed income
Creditors A/c Dr
To Profit & Loss A/c
It will be taxed u/s 41 i.e deemed income
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