Personal expenses of directors or employees
Expenses incurred for the personal benefit of directors, employees, or their family members are not allowable. These are treated as non-business in nature by tax authorities.

• Personal travel or leisure expenses are disallowed in tax computation
  
• Club memberships and entertainment benefits for personal use are excluded
  
• Medical or educational expenses of family members are not deductible
  
• Use of company vehicles for private purposes is partially disallowed
  

Capital expenditure and asset acquisition costs
Capital expenditure incurred to acquire or improve fixed assets is not deductible as revenue expense. These costs are subject to depreciation over time.

• Purchase price of land, buildings, or machinery is not deductible
  
• Major repairs that increase the asset’s life are considered capital in nature
  
• Expenditure on acquiring patents or trademarks is capitalized
  
• Only depreciation as per prescribed rates is allowed
  

Penalties and fines paid to authorities
Penalties and fines imposed by government or regulatory bodies are not allowed as deductions. These are treated as consequences of non-compliance.

• Penalty for late filing of returns is disallowed
  
• Fines for traffic violations, environmental breaches, or statutory delays are excluded
  
• Interest on late payment of taxes is not deductible under specific provisions
  
• Compounding fees and litigation penalties are also disallowed
  

Expenses not supported by proper documentation
Any expense that is not backed by valid records or proof may be disallowed. Proper invoices, receipts, and vouchers are necessary for claiming deductions.

• Cash payments exceeding the limit without evidence are disallowed
  
• Unsubstantiated travel and conveyance expenses are excluded
  
• Expenses without TDS compliance may be disallowed fully or partially
  
• Anonymous donations or payments not traceable are also excluded
  

Payments made in cash beyond prescribed limits
Cash payments exceeding the prescribed threshold are restricted under income tax law. These restrictions aim to curb black money and ensure transparent transactions.

• Cash payments above ten thousand rupees to a person in a day are disallowed
  
• Exceptions are available only in specific cases and notified sectors
  
• Capital and revenue payments are both covered under this restriction
  
• Repeated violations may lead to penalty under section forty
  

Expenses claimed under prohibited heads
Certain types of expenses are specifically prohibited from being claimed under the Income Tax Act. These include contributions or payments made for non-business purposes.

• Political contributions not made through prescribed modes are disallowed
  
• Corporate social responsibility expenses are not allowed as deduction
  
• Contributions to unregistered or unapproved funds are excluded
  
• Donations not eligible under section eighty G are disallowed for business
  

Excessive or unreasonable payments to related parties
Payments made to related persons must be at arm’s length. Any excess or unjustified payments may be disallowed wholly or in part under transfer pricing rules.

• Director or relative payments above market rates are scrutinized
  
• Rent or consultancy charges to associated firms must be reasonable
  
• Excessive commissions or bonuses are tested for commercial justification
  
• Section forty A two provides power to disallow unreasonable expenditure