Section 35D Deduction – For Preliminary Expenses

Section 35D reduction of Tax entails to amount spend which may usually be rejected on the ground that it is a capital nature or is incurred prior to the setting up of a premises.

Eligibility for Claiming Section 35D Deduction

Section 35D reduction could be asked by an Indian Company or by a person apart from a company who lives in India. The expenses that can be asked as a reduction under Section 35D must be in accordance to:

1. Expenditure incurred before the commencement of business.
2. Expenditure incurred after the commencement of business in connection with the extension of existing undertaking or in connecting with setting up a new unit.

Expenses Deductible under Section 35D

The below charges are allowed for reduction under Section 35D:

1. Expenditure incurred in connection with

1. 1. Preparation of a feasibility report.
   2. Preparation of a project report.
   3. Conducting a market survey or any other survey necessary for the business of the asses see.
   4. Engineering services relating to the business of the asses see.

1. Legal charges for drafting any agreement between the asses see and any other person having any relation to the setting up of the business of the asses see.
2. Where the asses see is a company, also, expenditure:
   1. By way of legal charges for drafting the MOA / AOA or printing of MOA / AOA.
   2. Incorporation fee.
   3. For issue, for public subscription , of shares in or debentures of the company, being underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus.
   4. Other expenses as given by the Government in different duration..

Amount Deductible under Section 35D

The maximum deductible amount under Section 35D should not be over 5% of the cost of the project. In the case of a company, the total amount cannot exceed 5% of the cost of the project or the capital employed in the premises of the company.

The sum needed as reduction as under the limit will be authorized as a reduction in 5 same yearly  installment starting with the last year starting of business or the last year where the extension of company undertaking is done ,the new industrial sector start production .