India: Guidance on when settlement payments cannot be claimed as deductions
Specific laws under which settlement payments are disallowed as deductions
The Central Board of Direct Taxes (CBDT) issued a notification in accordance with a provision of Finance (No. 2) Act, 2024 listing specific laws under which settlement payments cannot be claimed as deductions, effective April 23, 2025. The laws specified by the CBDT include:
- The Securities and Exchange Board of India Act, 1992
- The Securities Contracts (Regulation) Act, 1956
- The Depositories Act, 1996
- The Competition Act, 2002
Additionally, the CBDT clarified through “frequently asked questions” (FAQs) that no deductions will be allowed for expenditures incurred from FY 2024-2025 onwards for the settlement of proceedings under these laws.
Read an April 2025 report prepared by the KPMG member firm in India