Rule 22 — Computation of aggregate average advances for the purposes of section 31(1) [Table: Sl. No. 1] for deduction for provision of bad and doubtful debt. Made under s.31 of the Income-tax Act, 2025.
Rule 22 gives effect to Section 31 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Sub-rule (1) sets a three-step arithmetic for the aggregate average advances made by the rural branches of a scheduled bank, for the purposes of section 31(1) [Table: Sl. No. 1]. Under clause (a), the amounts of advances made by each rural branch as outstanding at the end of the last day of each month comprised in the tax year are aggregated separately — branch by branch, not bank-wide. Under clause (b), the sum so arrived at in the case of each such branch is divided by the number of months for which the outstanding advances have been taken into account for the purposes of clause (a). Under clause (c), the aggregate of the sums so arrived at in respect of each of the rural branches is the aggregate average advances made by the rural branches of the scheduled bank.
Sub-rule (2) borrows its two key terms rather than defining them: "rural branch" and "scheduled bank" have the meanings respectively assigned to them in sections 66(26) and 2(98).
Section 31(1) [Table: Sl. No. 1] measures part of a scheduled bank's deduction for provision for bad and doubtful debts against the aggregate average advances made by its rural branches, but an "average" of a balance that moves daily is meaningless until someone fixes the sampling points and the divisor. Rule 22 fixes both: month-end outstandings, averaged per branch, then added. Sub-rule (2) keeps the population of qualifying branches and banks in the hands of the Act's own definitions, so the rule cannot widen the deduction by widening the word "rural".
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Point at which each rural branch's advances are measured | Outstanding at the end of the last day of each month comprised in the tax year | Aggregated separately for each rural branch | Rule 22(1)(a) |
| Divisor for each branch's average | The number of months for which the outstanding advances have been taken into account for clause (a) | Not necessarily twelve; only the months actually taken into account | Rule 22(1)(b) |
The averaging happens at branch level and the addition afterwards, which is not the same as averaging the bank's total rural advances: a branch open for four months contributes a four-month average, because clause (b) divides by the number of months for which the outstanding advances have been taken into account, not by twelve. Only month-end figures count; a branch that runs high mid-month and settles by the last day is measured on the last day. And the rule decides only the arithmetic — whether a branch is rural at all, and whether the bank is a scheduled bank, is settled by sections 66(26) and 2(98), and the deduction itself by section 31(1).
A scheduled bank has two rural branches. Branch A's month-end outstanding advances over the twelve months of the tax year total Rs. 60 crore, so its average is Rs. 5 crore. Branch B opened in the tenth month and has month-end outstandings for three months totalling Rs. 4.5 crore, so its average is Rs. 1.5 crore, divided by three and not by twelve. The aggregate average advances made by the rural branches are Rs. 6.5 crore.
You meet it inside the computation supporting a scheduled bank's claim under section 31(1) [Table: Sl. No. 1] in its return, and in the branch-wise month-end schedules the Assessing Officer calls for when testing that claim.
the amounts of advances made by each rural branch as outstanding at the end of the last day of each month comprised in the tax year shall be aggregated separately
the aggregate of the sums so arrived at in respect of each of the rural branches shall be the aggregate average advances made by the rural branches of the scheduled bank