Amendment to Section 37: Disallowance of Settlement Amounts for Legal Contraventions from April 2025

From April 2025, the amendment to Section 37 of the Income Tax Act will disallow deductions for settlement amounts paid to resolve legal contraventions. This change aims to prevent companies from claiming tax benefits on payments made for legal violations, thereby reinforcing compliance and accountability. The disallowed deductions will specifically include those made to settle disputes arising from violations of laws, regulations, or orders.