Prepaid Expenses

Tax Glossary Definition

Prepaid Expenses

Prepaid expenses are payments made in advance for goods or services to be received in future periods. While they are initially recorded as assets in the books of accounts, they are generally deductible for tax purposes in the year they are incurred if they relate to the current accounting period.

Example: Prepaid insurance of ₹20,000 for the next year is recorded as an asset now and may be deducted in the year it is applicable

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