Reserves and provisions created for bad debts, inventory losses, etc. are allowable at the rates and limits set forth under the tax laws. The following provisions are considered as tax deductible:
- Contingencies and liabilities relating to judicial proceedings/ lawsuits
- Loss of inventory, subject to the limits prescribed
- Contingencies and liabilities created within the limits prescribed by the regulatory authorities of financial sector, insurance and gambling sector
Provisions relating to bad debts are deductible within the prescribed limits, if debts remain due for over 6 months and adequate steps have been taken for their recovery.