SECTION 44A SPECIAL PROVISION FOR DEDUCTION IN THE CASE OF TRADE PROFESSIONAL OR SIMILAR ASSOCIATION
Updated: Oct 14, 2022
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The Income Tax Act of 1961 contains a specific provision called Section 44A that specifies how a trade, professional, or other similar association's expenses are to be offset against the money it receives from its members through subscriptions or other sources. In the event of business or professional income, there is one category of expenses that the association may deduct as being incurred during the usual course of its operations and is covered by Sections 28[1] to 44DB[2]. These expenses may be referred to as "normal" expenses. It might be referred to as an "Other" expense under this provision. If the "other" expense exceeds the money received from members, whether in the form of subscriptions or another manner, the excess is considered a "deficiency" under the provisions of the aforementioned section. To calculate the "deficit" under this provision, any fees collected by the association from its members in exchange for providing any particular services should be disregarded. Additionally, it specifies how the "deficit" under the section should be offset against the association's income. It establishes a ceiling of 50% of the association's income up to which any year's deficit can be absorbed.
The main goal of this section is to deter organisations from over-subsidizing their services to their members and to encourage them to become self-sufficient by structuring their member subscriptions to cover the expense of defending and advancing their members' shared interests.
[1] Indian Kanoon (Section 28 of the Income Tax Act)- https://indiankanoon.org/doc/555776/ [2] Legislative Government (Section 44DB of Income Tax Act)-