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11.03 Basis of Deduction

11.03 Basis of Deduction A valid receipt of full particulars has to be obtained for payment (Cash basis) If Total Sun Deductible > Statutory Income, the excess is treated as trade loss

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11.03 Basis of Deduction

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  1. 11.03 Basis of Deduction • A valid receipt of full particulars has to be obtained for payment (Cash basis) • If Total Sun Deductible > Statutory Income, the excess is treated as trade loss • No deduction is allowable in respect of sums payable by a person out side Sri Lanka to another person out side Sri Lanka

  2. 11.03 Basis of Deduction • Interest: • Should be paid for a loan obtained for either • Construction /acquisition of a building after 01.04.2004 (for residential purposes) • Purchase of a site for construction of any building after 01.04.2004 (for residential purposes) • For any trade, business, profession or vocation (E.g. Acquisition of business)

  3. 11.03 Basis of Deduction • Interest: (Contd..) • Interest has to be paid on legal or contractual obligation to a licensed bank, finance company or any other person who declares such interest as his income. • 11.04 Annuity • Is a fixed sum payable annually either perpetually or any lesser period • Should not be of a capital nature

  4. 11.04 Annuity (Contd…) • It has to be paid under an order of court by way of alimony or maintenance (in case of divorce). It may also be on a duly executed deed of separation. • 11.09 Loss from Trade, Business, Profession or Vocation • Should be calculated according to tax regulations (not book losses) • Losses can be claimed if instead of a loss there was a profit, such profit would have been assessable

  5. 11.09 Loss from Trade, Business, Profession or Vocation (Contd…) • Losses has to be absorbed (deducted) up to 35% of the Total Statutory Income. But the TSI will not include: • For a person other than a company – Interest & Dividend subjected to a tax of 10% • To any person – Any reward, share of fine and interest on compensation subjected to a tax of 10%

  6. 11.09 Loss from Trade, Business, Profession or Vocation (Contd…) • Following losses are not deductible • Capital losses • Loss incurred in the disposal of shares, rights or warrants

  7. 11.11Unabsorbed Losses • Any unabsorbed loss can be carried forward for the next Y/A and so on. • But there are some time limits • No limit for Capital Allowances. Loss from leasing. Horse racing, FCBU losses • Losses cannot be carried forward if control changes of the business

  8. 11.12 Carry-back of losses: • - When a person ceases to carry on a trade, business, profession or vocation, after getting the consent of the CGIR he can carry back the loss for 3 preceding year of assessments. (Current + 3 Years) • From 01.04.2004 the setting off is limited to 35% of TSI • If the entire loss cannot be set-off through carry back?

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