02 July 2012
The rule for treating a debt as bad debt under the income tax is that it should be written off in the books of accounts and the company has taken all reasonable steps to recover the amount or it it should be explained to the satisfaction of the assessing officer that any steps would be useless. Please refer to section 36(1)(vii) of the income tax act.
02 July 2012
There is no limit on the time period within which the bad debt will have to be recognised. The business can write off the bad debt as and when they have information that the debt has turned bad provided the other conditions like legal action etc... eg. You get a news that debtor has been declared insolvent by the court etc...
CAclubindia
