Income tax

vijay (Querist) 01 November 2012 This query is : Resolved
Dear Sir, My company announce a scheme to our distributors under which they will give 50% discount to their distributor or 1 unit free with purhase of 1 unit for the promotion of their product. i want to know that is it allowable under income tax act. if it is allowable uder I/T act. What will be the accounting treatment for giving 1 unit free with the purchase of 1 unit. I want also to know that what can be the maximum limit of giving discount to customers.
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Sivadas Chettur (Expert) 03 November 2012
The discount will naturally be shown as a deduction from sale as the sale will be recorded at the gross amount.Regarding the items offered free it actually requires no accounting treatment and you may note the fact in the stock records for statistical purposes. The value of free items shall be naturally adjusted by way of lower revenue while showing the closing stock on the date of closure of accounts.

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