NBFCs eligible for claim of deduction for provision for bad and doubtful debts [Section 36(1)(viia)]

Effective from: A.Y.2017-18

(i) Under sub-clause (c) of section 36(1)(viia), in computing the profits of public financial institutions, State financial corporations and State industrial investment corporations, deduction of an amount not exceeding 5% of total income, computed before making any deduction under section 36(1)(viia) and Chapter VI-A, is allowed in respect of any provision for bad and doubtful debt.

(ii) Since Non-Banking Financial Companies (NBFCs) are also engaged in financial lending to different sectors of society, sub-clause (d) has been inserted in section 36(1)(viia) to provide deduction on account of provision for bad and doubtful debts of an amount not exceeding 5% of total income (before making any deduction under section 36(1)(viia) and Chapter VI-A) in the case of NBFCs also.

(iii) Meaning of “Non-Banking Financial Company” [Section 45-I (f) of the Reserve Bank of India Act, 1934]:

(i)	a financial institution which is a company
(ii)	a non-banking institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending in any manner
(iii)	such other non-banking institution or class of such institutions, as the Bank may, with the previous approval of the Central Government and by notification in the Official Gazette, specify.