Guidelines on Provision for Bad debts

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Chaitanyaa (Querist)
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04 May 2022 Sir,

What are the extant guidelines regarding the provision for bad debts. Whether every Company needs to pass this entry or any condition is there for the this provision. Also whether provision for bad debts is a tax deductible expense?

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CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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04 May 2022 Provision for bad debt is not a tax-deductible expenses.
Provide it based on percentage of bad debts of previous 5 years average.

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Saurabh Anokhchand Jain

Saurabh Anokhchand Jain (Expert)
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28 May 2022 The CBDT has issued Circular No. 12/2016 dated 30th May 2016 in which it has stated that in accordance with the law laid down by the Supreme Court in TRF Ltd. vs. CIT 323 ITR 397, claim for any debt or part thereof in any previous year shall be admissible under section 36(1)(vii) of the Act, if it is written off as irrecoverable in the books of accounts of the assessee for that previous year and it fulfills the conditions stipulated in sub section (2) of sub-section 36(2) of the Act.

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