Query relating to special reserve under sec 36 (1)(viii) of the Income tax Act

our bank created special reserve for claiming deduction. The amonut transferd to special reserve shows in Balance sheet can withdraw?
Replies (2)
Quick Summary
This discussion clarifies the rules surrounding special reserves created under Section 36(1)(viii) of the Income Tax Act, particularly for banks and financial institutions. It explains how amounts withdrawn from such reserves are treated as taxable business profits. The post also details the calculation of eligible deductions, which are capped at the lowest of three specific limits related to amounts transferred, profits, or paid-up capital and reserves.

Amount withdrawn from Reserve Account: [Section 41(4A)]: Where a deduction has been allowed in respect of any special reserve created and maintained under section 36(1)(viii), any amount subsequently withdrawn from such special reserve shall be deemed to be the profits and gains of business or profession and accordingly be chargeable to income-tax as the income of the previous year in which such amount is withdrawn. Further, where any amount is withdrawn from the special reserve in a previous year in which the business is no longer in existence, the provisions of this sub-section shall apply as if the business is in existence in that previous year. Amount of Deduction : A financial corporation, banking company, co-operative bank and a housing finance company can claim deduction under section 36(1)(viii) as follows, if a few conditions are satisfied — the amount transferred during the previous year to the special reserve account created for the purpose of section 36(1)(viii); or 20 % of the profits derived from the business of providing long-term finance before claiming deduction under section 36(1)(viii); or 200 % of (paid-up share capital and general reserve as on the last day of the previous year) minus the balance of the special reserve account on the first day of the previous year, whichever is lower.
Good and detailed explanation. thanks @ mr Sharma

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