Understanding Rule 11 D of Income Tax: Essential Guide

Learn about Rule 11 D of income tax, focusing on related party transactions and expense disallowance.

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Rule 11 D of income tax pertains to expenses that must be disallowed if payments are made to related parties or associated enterprises. It ensures fair market value and prevents tax evasion by inflating expenses through transactions between related parties. Companies must justify these expenses as legitimate to comply with the regulations.

FAQs & Answers

  1. What expenses are disallowed under Rule 11 D? Expenses paid to related parties or associated enterprises are disallowed under Rule 11 D if these transactions do not reflect fair market value.
  2. How does Rule 11 D prevent tax evasion? Rule 11 D prevents tax evasion by disallowing inflated expenses that arise from transactions between related parties, ensuring companies justify the legitimacy of their expenses.
  3. What do companies need to comply with Rule 11 D? Companies must provide justification for their expenses as legitimate and ensure that payments to related parties reflect fair market value to comply with Rule 11 D.
  4. Are there exceptions to Rule 11 D? Rule 11 D primarily disallows related-party transactions unless they are substantiated with proper documentation and evidence of fair market value.

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