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Intermediate Tax: Topic 2 - 4 Business income and Deductibility of…
Intermediate Tax: Topic 2 - 4
Business income and Deductibility of expenses
Deductibility of Expenses
Section 33: General Deduction
Expenses must be revenue in nature
Incurred solely for business purposes
Incurred during the basis period for a YA
Must be for the purpose of producing business income
Section 34: Business Deduction
Trade debts that are estimated to be wholly irrecoverable
Contribution made to approved scheme (EPF)
Equipment to assist disabled employee
Revenue expenditure incurred on work of a permanent nature (land, buildings)
Section 39: Deductions Not Allowed
Expenses must be capital in nature
Domestic or private expenses
Amount made to unapproved scheme
Any sum intended to be employed as capital
Business Income
Type of gross income from a business
Other Receipts
Insurance recoveries
Discount
Commissions
Reimbursement
Recoupment
Stock-in-trade
Dividend Income
Interest Income
Bad debts recovered
Business Income: Bad debt written off in earlier year qualifies for tax deduction
Non-Business Income: Bad debt written off in earlier period does not qualify for tax deduction
Stock Withdrawal
Advance Receipts
Business Income: No refund required
Non-Business Income: Refund required
Rental Income
Business Source
Can claim capital allowance
Charged under S4(a) if maintenance is comprehensive and actively provided
Tax on receivable basis (accrued basis)
Non-Business Source
Cannot claim capital allowance
Tax based on received basis
Charged under S4(d) if maintenance is not provided
Deductible Legal and Professional Expenses
Debt collection
Renewal of Loans
Preperation of accounts
Legal expenses incurred by a landlord
Defending action connected with trade