Taxation Exam > Taxation Videos > Income Tax for assessment (Inter Level) > S 36(1)(iii). Interest on Borrowed Capital
S 36(1)(iii). Interest on Borrowed Capital Video Lecture | Income Tax for assessment (Inter Level) - Taxation
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FAQs on S 36(1)(iii). Interest on Borrowed Capital Video Lecture - Income Tax for assessment (Inter Level) - Taxation
| 1. What is the purpose of S 36(1)(iii) in relation to interest on borrowed capital taxation? |  |
Ans. S 36(1)(iii) is a provision in the tax law that allows taxpayers to claim a deduction for the interest paid on borrowed capital. This provision is aimed at reducing the tax burden on businesses and individuals who borrow money for investment purposes.
| 2. How is the interest on borrowed capital taxed under S 36(1)(iii)? | |
Ans. Under S 36(1)(iii), the interest on borrowed capital is considered as a deductible expense for tax purposes. This means that the amount of interest paid can be subtracted from the taxable income, resulting in a lower tax liability for the taxpayer.
| 3. Are there any limitations or conditions for claiming the deduction under S 36(1)(iii)? | |
Ans. Yes, there are certain limitations and conditions for claiming the deduction under S 36(1)(iii). The borrowed capital must have been used for the purposes of generating income, such as for business investments or property acquisitions. Additionally, the interest expense must be directly related to the borrowed capital and should have been actually paid during the relevant tax year.
| 4. Can individuals also claim the deduction for interest on borrowed capital under S 36(1)(iii)? | |
Ans. Yes, individuals can also claim the deduction for interest on borrowed capital under S 36(1)(iii). This provision applies to both businesses and individuals who have borrowed capital for investment purposes. However, it is important to meet the conditions and limitations mentioned earlier to be eligible for the deduction.
| 5. How does claiming the deduction for interest on borrowed capital affect the overall tax liability? | |
Ans. Claiming the deduction for interest on borrowed capital reduces the taxable income, resulting in a lower tax liability for the taxpayer. By deducting the interest expense, the taxpayer effectively reduces their overall taxable income, which in turn reduces the amount of tax they owe. This deduction can significantly impact the tax liability and provide tax savings for businesses and individuals who have borrowed capital for investment purposes.
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Nov 16, 2024 Last updated |
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