This blog explains whether a business can claim deductions for expenses like rent, salaries, and utilities during a period of zero income. It focuses on Section 37(1) of the Income Tax Act and clarifies the difference between an idle business and one that never started. Includes a checklist to help taxpayers understand eligibility.

This blog post examines the clarified disallowances under Section 37(1) of the Income Tax Act following the Finance Act 2022 amendment to Explanation 1. It details how expenses related to illegal activities, penalties, compounding fees, prohibited benefits/perks (like certain freebies), and violations of foreign laws are now more explicitly non-deductible, emphasizing the need for businesses to ensure compliance and maintain thorough documentation.