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[Section 36(1)(viii)] : Special Reserve Created and Maintained by Financial Corporation (Transfer to Special Reserve)

The scheme of section 36(1)(viii) is given below—

WHO CAN CLAIM DEDUCTION - The following are eligible for deduction under the section :—

Who can claim deduction in respect of amount transferred so the special reserve account


What is eligible business for the purpose of calculating deduction -

ICICI, IFCI, IDBI, LIC, UTI, Infrastructure Development Finance Company Limited, or a public financial institution notified by the Central Government under section 4A of the Companies Act, 1956, a financial corporation, banking company, co-operative bank (other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank).


The business of providing long-term finance in India for industrial or agricultural development or development of infrastructure facility in India or (up to the assessment year 2009-10) construction or purchase of residential houses in India or (from the assessment year 2010-11 onwards) development of housing in India.

A housing finance company (i.e., a public company formed in India with the main object of carrying on the business of providing long-term finance for purchase or construction of residential house in India).


The business of providing long-term finance for construction or purchase of residential houses in India.

Any other financial corporation including the public company.


The business of providing long-term finance for development of infrastructure facility.

• Infrastructure facility - For this purpose “infrastructure facility” means—

a.         infrastructure facility as given in Explanation to section 80-IA\(4)(i) or any other public facility of a similar nature as may be notified by the Board,

b.         an undertaking referred to in section 80-IA(4)(ii)/(iii)/(iv)/(vi),

c.         an undertaking referred to in section 80-IB(10).

• Long-term finance - The expression “long-term finance” has been defined to mean any loan or advance, where the terms under which money is loaned or advanced provide for repayment along with interest thereof during a period of not less than 5 years.


a.         The amount of deduction under section 36(1)( viii) is as follows — a. the amount transferred during the previous year to the special reserve account created for the purpose of section 36(1)(viii) or

b.         20% of the profits derived from the business activities which is computed under section 28 but before claiming deduction under section 36(1)(viii) ; or

c.         200% of ( paid-up share capital and general reserve as on the last day of the pervious year) minus the balance of the Special Reserve Account on the first day of the previous year.

Whichever is Lower.


More Topics .... " Business or Profession"
Definition of the Head ' Business or Profession'-[Sec.-28]
Compensation Received as Business Income(Section-28(ii))]
Income of a Trade or Professional Association [Section 28(iii)]
Income from Export Incentives is chargeable to Income Tax
Any Amount Received Under certain Agreement for not to Carry on Business [Section 28(va)]
Speculation Business [Explanation to Section 28]
Profit Earned from an Illegal Business
Transfer of certain Assets Specified u/s 35AD in certain circumstances [Section 28(vii)]
Certain Incomes relating to business but not taxable under the head ‘Profits Gains of Business or Profession .
Computation of Income of Business or Profession - General Important Points
General Principles - for Deductions Allowed from Gross Income of Business and Professions
Deductions from Gross Income of Business or Profession [ Section 30 to 44DB]
Expressly Admissible Deductions from Gross Income from Business or Profession [Section 30-36]
Expenditure Incurred in the Field of Scientific Research [Section 35]
Expenses on Research Activities carried on by the assessee himself
Contribution to Approved Institutions to carry on Research is Allowed as Weighted Deductions for Calculating Profits and Gains of Business or Professions.
Expenditure incurred on the acquisition of Patents Rights or Copy Rights [Section 35A] [Applicable for expenditure incurred before 1-4-1998]
Expenditure on know-how [Section 35 AB] [Applicable for expenditure incurred before 1-4-1998]
Expenditure for obtaining License to operate Telecommunication Services [Section 35 ABB]
Expenditure on eligible projects or schemes [Section 35 AC]
Deduction in respect of expenditure incurred on setting up of a Specified Business [Sec. 35AD]
Any amount given to an institution or association [Section-35CCA]
Expenditure on Notified Agricultural Extension Project [Section-35 CCC] [w.e.f. A.Y. 2013-14]
Expenditure on Notified Skill development project [Section-35 CCD] [w.e.f. A.Y. 2013-14]
Amortisation of Certain Preliminary Expenses [Section 35D]
Expenditure on demerger or amalgamation [Section 35DD]
Amortisation of Expenditure Incurred Under Voluntary Retirement Scheme [Section 35DDA]
Expenditure on Prospecting etc., for certain Minerals [Section 35E]
Other Deductions Allowed to Compute Income from Business or Profession   [Section-36]
Interest on Borrowed Capital [Sec. 36(1)(iii)].
Deduction of discount on Zero Coupon Bond [Section 36(iiia)]
Contribution to Provident and Superannuation Fund [Sec. 36(1)(iv)].
Employee’s contribution towards staff welfare schemes [Sec. 36(1)(va)]
Bad debts [Sec. 36(1)(vii)]
Bad debts of Banks, financial institution and industrial investment corporation etc. [Section 36(1)(viia)]
Special Reserve Created and Maintained by Financial Corporation [Section 36(1)(viii)].
Expenditure on Family Planning [Section-36(1)(ix)].
General Or Allowable Deductions [Section 37]
Commission earned by the agents of Life Insurance Corporation, Unit Trust of India, Post Office or Mutual Funds
Legal Expenses in the Interest of Business are Allowable Expenses
Losses incidental to Business Allowed to be Debited.
Expenses Expressly Disallowed In the Case of any ‘Assessee’ [ Section-40a]
Expenses Expressly Disallowed In the Case of any Firm [Section 40(b)]
Expenses Expressly Disallowed In General Cases [Section 40(b)]
Disallowing of certain Expenses under certain circumstances like ‘Payments to Relatives’
Payments exceeding ` 20,000 by cash/bearer cheque [Section 40A (3)].
Provision for the Payment of Gratuity – [Section-40A(7)]
DEEMED PROFITS Under Profits and Gains of Business or Professions [Section 41]
VALUATION OF STOCK for Profit and Gains of Business or Professions
Deduction Of Certain Payments Only If Actually Paid [Section 43B]
Maintenance Of Accounts By Certain Persons Carrying On Profession Or Business. [Sec. 44AA]
Compulsory Audit For The Non-Corporate Assessees [Section-44 AB]
Computation of Income on Estimated Basis [Section 44AD]
Profit from the business of carriage of goods for truck owners [Section 44 AE]
Special provision for computation of income from royalties in case of nonresidents [Section 44DA]
Partly Agricultural and Partly Business Income
Adjustment In The Profit And Loss A/C Prepared By The Assessee
Computation of Profits and Gains of a Non-Resident from Shipping Business— [Section 44B]
Computation of Profits and Gains of business of Oil Exploration [Section 44BB]
Computation of Profits and Gains of the Business of operation of Aircrafts by Non-Resident [Section 44 BBA]
Computation of Profits of Foreign Enterprises [Section 44BBB]
Ceiling Limits in respect of Head Office Expenses [Section 440]
Special Provisions in case of Income of Public Financial Institutions etc. [Section 43D]
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