Special Reserve ;
Deduction in respect of a special reserve created and maintained by a banking company –
(a) Section 36(1)(viii) provides deduction in respect of any special reserve created and maintained by a specified entity, which includes a banking company.
(b) The quantum of deduction, however, should not exceed 20% of the profits derived from eligible business computed under the head “Profits and Gains of Business or Profession” (before making any deductionunder this clause) carried to such reserve account.
(c) The eligible business, in case of a banking company, means the business of providing long-term finance for –
(i) industrial or agricultural development or development of infrastructure facility in India; or
(ii) development of housing in India.
(d) However, where the aggregate amount carried to such reserve account exceeds twice the amount of paid up share capital and general reserve, no deduction shall be allowed in respect of such excess.