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Section 40(a)(i)

Payments Outside India or to Non Resident on which TDS not deducted

Following Expenses not deductible

Any payment made

  • Outside India
  • In India to a Non Resident

On which TDS is applicable

But TDS Not deducted

      Or

TDS deducted but not deposited within due date of ITR  (31 July/30 September)

(Earlier it was due date of TDS Deposit -30 April)

Examples of Such Expenses are Interest, Royalty, Fees for Technical Services etc

 

Payment Covered here are Interest, Royalty, fee for technical services or any other sum chargeable to income tax

Circular 3/2015 has clarified that if TDS not deducted on payment to non residents,only that portion will be disallowed which is chargeable to Income tax and not the whole payment

 

 

Deduction Allowed in Next Year

 

When TDS actually deducted and deposited in next year (after TDS Deposit date)

Or

When TDS deducted in previous year but deposited in next year

Then

That expense allowed in that next year when actually deposited

 

 

Section 40(a)(ia)

Payments to Residents on which TDS not deducted

 

Any Amount Payable

To Residents

On which Tds was deductible

But TDS Not deducted

      Or

TDS deducted but not deposited within due date of ITR  (31 July/30 September)

In such a case,30% of the amount will be disallowed

(Earlier whole 100% was disallowed)

Examples of Such Expenses are Interest, Royalty, Fees for Technical Services etc

 

CBDT Circular 10/2013

Note:-Although the Section mentions that this Section is Applicable on “Any Amount payable”.as per CBDT Circular,it is “Any amount paid or payable”

Hence this section applicable to those cases also when amount has been actually paid to assesse and not only those when amount is payable.

Deduction Allowed in Next Year

When TDS actually deducted and deposited in next year (after ITR Due date)

Or

When TDS deducted in previous year but deposited in next year

Then

That 30% which was earlier disallowed will be allowed in that next year when actually deposited

 

 

Section 40 (a)(ic)

Any Amt paid for Fringe Benefit Expense is disallowed

This tax is now abolished.

 

Section 40 (a)(iia)

Amt paid for Wealth tax within India or outside India is disallowed

 

Section 40 (a)(iii)

Any payment of salary

outside India

or

In India to Non resident

On which TDS not deducted.

is not allowed as deduction

 

Section 40 (a)(iv)

Any payment to a provident or other fund established for the benefit of employees of the assessee, is disallowed unless

the assessee has made effective arrangements to TDS Deducted under the head “Salaries”;

 

Section 40 (a)(v)

Deductions for Partnership firm

This we will study later

 

QUESTIONS

 

Q 1

Particulars Amount
SALES 6000000
Less  
EXPENSES 4000000
PROFIT 2000000

Suppose  1500000 expenses were paid outside India on which TDS was deductible but not deducted

-a-

Computation of PGBP Income  
Profit as per P& L A/c 2000000
Add  
Expense Disallowed  
TDS Not deducted 1500000
   
Expense Allowed  
   
PGBP INCOME 3500000

 -ea-

Q 2

Particulars Amount
SALES 6000000
Less  
EXPENSES 4000000
PROFIT 2000000

Suppose  1500000 expenses were paid outside India on which TDS was deductible but not deducted 

As per Income tax,7.5% of Income is deemed to be Income chargeable to tax for these non residents

-a-

Computation of PGBP Income  
Profit as per P& L A/c 200000
Add  
Expense Disallowed  
TDS Not deducted 11250
(150000*7.5%)  
Expense Allowed  
   
PGBP INCOME 211250

-ea-

Q 3

Particulars Amount
SALES 6000000
Less  
EXPENSES 4000000
PROFIT 2000000

Suppose  1500000 expenses were paid in India to residents on which TDS was deductible but not deducted

-a-

 

Computation of PGBP Income  
Profit as per P& L A/c 2000000
Add  
Expense Disallowed  
TDS Not deducted 450000
(1500000*30%)  
   
Expense Allowed  
   
   
PGBP INCOME 2450000

-ea-

Q 4

Particulars Year 1 Year 2
SALES 6000000 7000000
Less    
EXPENSES 4000000 4500000
PROFIT 2000000 2500000
     
Suppose expenses include following payment to Residents
Expenses on which TDS deducted but deposited late on 21 July 20000 25000
Expenses on which TDS deducted but deposited late on 14 Aug 30000 35000
     

The due date of ITR is 31 July

-a-

Year 1  
Computation of PGBP Income  
Profit as per P& L A/c 2000000
Add  
Expense Disallowed  
TDS Deposited after due date of ITR (30000*30%) 9000
   
   
Expense Allowed  
   
   
PGBP INCOME 2009000
Year 2  
Computation of PGBP Income  
Profit as per P& L A/c 2500000
Add  
Expense Disallowed  
TDS Deposited after due date of ITR (35000*30%) 10500
   
Expense Allowed  
TDS of Last Year deposited this year (30000*30%) 9000
   
PGBP INCOME 2501500
  1. Income Tax
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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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