What are Bad Debts Provisions under Section 51 of ITA-2023?

Bad Debts Provisions under Section 51 of ITA-2023 allow banks and financial institutions to make reasonable provisions for debts that are unlikely to be recovered. These provisions help maintain financial accuracy and comply with tax regulations.

Why are Bad Debts Provisions important for banks?

Bad Debts Provisions are important because they ensure banks reflect realistic asset values, maintain accurate financial statements, and comply with the tax deduction rules outlined in ITA-2023.

How do financial institutions calculate Bad Debts Provisions?

Financial institutions calculate Bad Debts Provisions based on overdue loans, risk assessment, and historical recovery data. The calculation must follow the guidelines in Section 51 of ITA-2023 and the central bank’s directives.

Can Bad Debts Provisions be deducted from taxable income?

Yes. Under Section 51 of ITA-2023, banks and financial institutions may deduct approved Bad Debts Provisions from taxable income, subject to specific limits and compliance verification.

What happens if a previously written-off debt is recovered?

If a previously written-off debt is recovered, the recovered amount must be treated as taxable income in the year of recovery as per ITA-2023 provisions.

Bad Debts Provisions(Under Section 51 of ITA-2023)

Bad Debts Provisions for Banks and Financial Institutions (Under Section 51 of ITA-2023)

A clarification has been issued regarding Section 51, Sub-section (2), Clause (a) of the Income Tax Act, 2023, specifically concerning the recognition of bad debts.

According to the clarification:

If any loan or part thereof is classified as non-recoverable by banks or financial institutions in accordance with:

· International Accounting Standards (IAS),

· International Financial Reporting Standards (IFRS), and

· Applicable laws, rules, and regulations of Bangladesh,

and is duly recognized as written off in the financial statements, then such bad debts shall be eligible for deduction under the provisions of this section for banks and financial institutions.

This clarification shall be effective from the assessment year 2025–2026.

Bad Debts Provisions for Banks and Financial Institutions (Under Section 51 of ITA-2023)

Bad Debts Provisions for Banks and Financial Institutions (Under Section 51 of ITA-2023)

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