Section 35D Deduction – For Preliminary Expenses

Section 35D Deduction – For Preliminary Expenses
The Section 35D Deduction is a new tax break that lets you deduct expenses from your income

The introduction of Section 35D was a great incentive for entrepreneurs who are willing to spend their own money in order make sure that they have all prerequisites necessary before beginning any business. This way, these individuals can take advantage and claim deductions which would otherwise not be available if this act hadn’t been passed by our government!

Section 35-d provides an opportunity where promoters may deduct from taxable income certain preliminary expenses incurred at the time one incorporates his/her company with no limit on how much could actually get taxed depending upon ones individual situation

Eligibility for Claiming Section 35D Deduction

The Section 35D Deduction can be claimed by an Indian Company or person who is not just a company, but also resident in India. The expenses that are eligible for taking this deduction must arise from one of the following three categories:

1) expenditure incurred before the commencement prior to commencing business;

2) spending on extensions/new establishments connected with your existing undertaking(s);  

3). Any other activity undertaken after starting up new units that was necessary specifically because you want additional income taxed at lower rates than what would otherwise have been possible.

The expenses deductible under Section 35D

1) The corresponding expenses incurred in connection with

  • Generating feasibility report is a crucial step
  • A well-prepared project report
  • Conducting a market survey or any other surveys necessary for the business of Assessee.
  • The chargeable items include engineering services relating to the business of assessee.

2)Legal charges for drafting any agreement between the assessee and anyone else involved in starting or running their business such as an attorney, accountant etc.

3)Where the assessee is a company, they are also taxed on their expenditure. Through legal charges for drafting an MOA/AOA, printing of the document and other expenses.

  • Incorporation fee
  • For issue or public subscription shares in companies underwriting commission brokerage & advertisement cost as notified by government from time to time


The amount that can be deducted under section 35D

The maximum 5% deductible under Section 35D cannot be over either the capital employed in business or projects, whichever is less. The amount that qualifies for this tax break will qualify as an installment payment beginning with last year’s ending date and lasting through all five years of its duration before being refunded back to you!

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