According to section - 36(1)(vii) - Bad debt will be allowed when :-
1- They should be written off in books.
2- They should be taken into account in computing the income of previous year in which ded. is claimed or in any earlier years.
Explanation to this sec. - For the purpose of this clause any bad debt (to be written off) should not include any provision for bad or doubtful debt.
Querry:- What is the benefit of creating provision for d/debts when they are not allowed as deduction. Income tax allows deduction only when entry is
:- Bad deb dr - to debtor (and not bad debt dr -to prov for doubtful debt). This way prov for doubtful debt will always remain idle with no use.