Every year, businesses pay more tax than they should. Not because they’re doing anything wrong, just because a handful of perfectly legal deductions never make it into the return. Here’s what you’re probably missing.
1. Expenditure on Scientific Research (Section 35)
Businesses that invest in R&D often don’t realise how generous this deduction actually is. Capital expenditure on in-house research (land excluded) is fully deductible. Revenue expenses are deductible in the year they’re incurred. For contributions to approved research institutions, the deduction can exceed what you actually paid.
We’ve seen manufacturing clients spending serious money on product development and only claiming a fraction of what they’re entitled to. The investment is tracked. The claim isn’t.
2. Preliminary Expenses (Section 35D)
Setting up a company isn’t free. Legal fees, ROC filing costs, project report preparation, feasibility studies, all of this happens before the business earns its first rupee. Section 35D lets you spread these costs over five years at 20% per year.
The problem is that by year three, nobody’s looking at this anymore. The incorporation documents are filed away somewhere, the CA who handled the setup may have changed, and this deduction just quietly stops getting claimed. If your business is between 2 and 5 years old, go back and check.
3. Employee Welfare Fund Contributions (Section 36)
PF and superannuation contributions from the employer side are deductible that part most people know. What trips businesses up is the timing. The deduction is on actual payment, not on what you’ve accrued in your books.
So if March’s PF contribution is paid in April, it doesn’t reduce this year’s taxable income. It reduces next year’s. Sounds small, but for businesses with large payrolls it adds up, and wrong timing leads to mismatched claims that invite scrutiny.
4. Bad Debts Written Off (Section 36(1)(vii))
Most businesses have them. A client who went quiet, an invoice that’s two years old, a distributor who shut down. If the debt was part of your income at some point and you’ve genuinely given up on recovering it, you can write it off and claim the deduction.
Two things go wrong here consistently. One: businesses write it off mentally but not in the books. Two: they do write it off, but in the wrong year. The deduction applies in the year the write-off happens in your accounts. Not when you decided it was uncollectable in your head.
5. Employment Generation Deduction (Section 80JJAA)
This one genuinely surprises people. If you’ve added new employees to your payroll and paid them for at least 240 days in the year, you can claim an additional 30% deduction on their wages and you can do this for three consecutive years per batch of new hires.
For any business that’s been growing headcount, this is real money. A company that hired 20 people last year at an average salary of Rs. 4 lakh is looking at a deduction of Rs. 24 lakh that most of them never claimed. The business needs to be subject to a tax audit, and wage thresholds apply, but it’s worth checking every year.
6. Business Loss Carry Forward — Use It Before You Lose It
Business losses can be carried forward for eight assessment years and set off against future profits. Sounds straightforward. The part that catches people out: you have to file your return on time to preserve this benefit.
Miss the due date, and the right to carry forward business losses is gone. Not delayed. Gone. We’ve seen profitable businesses in later years realise they could have had significant set-offs if only the earlier loss year returns had been filed on time. It’s one of those things where the cost of late filing isn’t obvious until years later.
7. IND AS and Tax Computation Differences
Companies that have moved to IND AS accounting know that it changes how a lot of things are recognised. Lease liabilities under Ind AS 116 sit on the balance sheet differently. Expected credit losses under Ind AS 109 are recognised earlier. Fair value movements show up in P&L.
None of this automatically translates into a tax deduction. But some of it does, and you need proper IND AS consultancy services to identify where book profit and taxable income diverge in your favour. The computation isn’t obvious from the financials alone, and firms without experience in Ind AS often miss these adjustments entirely.
8. RERA Compliance Costs
Real estate developers are spending significantly more on compliance than they were five years ago. RERA registration fees, quarterly reporting costs, legal charges for project registration, fees paid to RERA consultants for ongoing advisory, all of this is business expenditure.
These costs are deductible as revenue expenditure in the year they’re incurred. On bigger projects with long timelines, the annual compliance spend can be substantial. It should be tracked, documented, and claimed not buried under ‘miscellaneous expenses’ where it might not get the attention it deserves.
9. Unreclaimable GST as a Deductible Expense
This one sits right at the intersection of GST and income tax, which is probably why it gets missed. When you pay GST on an input but can’t claim the input tax credit because of a vendor mismatch, a blocked credit item, or a GSTR-2A reconciliation gap that GST isn’t just gone. It becomes a business cost.
And as a business cost, it’s deductible for income tax purposes. A good GST consultant will reconcile this at year-end. Without that reconciliation, you’re losing the ITC and also missing the income tax deduction. Double loss, single oversight.
How a Professional Can Help You Claim These Right
Knowing the sections is one thing. Applying them correctly to your specific business given your accounting method, the year of the transaction, how the expense is documented, and how it interacts with your overall tax position, is where it gets nuanced.
At JD Shah Associates, we work across audit, tax advisory, IND AS implementation, GST, RERA, and IPO readiness. That cross-practice view means we catch things that fall through the cracks when compliance is handled in silos. A tax consultant in Mumbai who only sees your return won’t necessarily know what the auditing firm found, or what the GST reconciliation showed.
We help businesses with:
- Business tax planning and return filing
- Deduction optimisation and documentation review
- IND AS consultancy services and financial reporting
- GST advisory and year-end reconciliation
- RERA compliance and advisory for developers
- Tax audit and income tax representation
- IPO consultancy and listing readiness
Final Thought
The tax savings are usually already in the business. Preliminary expenses sitting unclaimed from year two. A batch of new hires whose 80JJAA deduction was never applied. GST that couldn’t be reclaimed and should have flowed into the income tax computation.
None of this is aggressive planning. It’s just using what exists. You just need someone who’s paying close enough attention to catch it.
If you’d like a review of your current tax position, the team at JD Shah Associates is happy to help. Reach out and we’ll take it from there.
