As part of its continuing efforts to make tax evasion unattractive, the government has said that losses in previous years cannot be set off against tax liabilities on undisclosed income.
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"Presently, there is ambiguity regarding set off, of brought forward loss against undisclosed income detected in search operations," Finance Minister Nirmala Sitharaman said in her Budget speech on Tuesday.
"It has been observed that in many cases where undisclosed income or suppression of sales etc. is detected, payment of tax is avoided by setting off, of losses. In order to bring certainty and to increase deterrence among tax evaders, I propose to provide that no set off, of any loss shall be allowed against undisclosed income detected during search and survey operations," she added.
Sitharaman clarified that any surcharge or cess on income and profits were not allowable as business expenditure. Her comment was in the context of some courts ruling that health and education cess can be treated as business expenditure.
"Income-tax is not an allowable expenditure for computation of business income. This includes tax as well as surcharges," Sitharaman said.
"To reiterate the legislative intent, I propose to clarify that any surcharge or cess on income and profits is not allowable as business expenditure," she said.
First Published: Feb 1, 2022 1:38 PM IST
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