Guide to .. Tax Management ,Tax Planning and Tax Saving

[Section 43B] : Deduction Of Certain Payments Only If Actually Paid

Any payment of sales tax, employer’s contribution to any provident fund, superannuation fund or gratuity fund, or any other fund for the welfare of employees will be allowed only in computing the income of that previous year in which such sum is actually paid by him. In case a deduction has already been claimed on accrual basis in any earlier previous year, it will not be allowed again in the year in which it is actually paid.

These payments are :

(a) any sum payable by the assessee by way of tax, duty, cess or fee by whatever name called, under any law for the time being in force.

(b) any sum payable by the assessee as an employer by way of contribution of any provident fund, or superannuation fund or gratuity fund or any other fund for the welfare of employees.

(c) any sum referred to in clause (ii) of sub-section (1) of section 36, i.e., bonus or commission payable to employees.

(d) any sum payable by assessee as interest on any loan or borrowing from any public financial institution or a State Financial Corporation or a State Industrial Investment Corporation in accordance with the terms and conditions governing such loans or borrowing.

Deduction regarding these payments shall be allowed if such payments are actually made before filing of return u/s 139(1).

(e) any sum payable by the assessee as interest on any term loan from a scheduled bank in. accordance with the terms and conditions of the agreement governing such loan.

(f) Any amount payable by the assessee as an employer in lieu of any leave at the credit of employee shall be allowed to be debited only if it is made in accordance with the provsis of section 43B.

In case deduction for the above mentioned amount has already been claimed upto prevktis year ending on 31st March 2001, the same will not be considered for the deduction rn the year in which it is actually paid. [Section 43B Explanation 3B ]

U/s 43B (provisions) the above payments shall be allowed in following manner :

(i) If all these payments, as mentioned above, are actually paid by the end of previous year i.e. 31st March, such payments shall be fully allowed.

(ii) If payments [as mentioned above at (b) above] of provident fund or employees’ state insurance contribution is paid before due date prescribed under P.F. Act or E.S.I. Corporation Act, such payment shall be fully allowed. In case these payments are made after due date, these shall never be allowed.

(iii) If all the above payments are paid after 31St March but before prescribed date of filing of return, it shall be allowed to be debited in the year to which these payments belong. If it is paid after prescribed date, the payment shall be allowed to be debited in the year in which payment is made.

(iv) In case payments as mentioned above are made by cheque, the proof of their encashment must be submitted within 15 days from due date/prescribed date.

Important points :

(i) Section 43B is applicable only if the assessee maintains books of account on mercantile/due basis. However, if the books of account are maintained on ‘cash basis’ then section 43B shall not be applicable. In such a case, all the above mentioned payments for any previous year (like any ether expense) shall be allowed as deduction only if the amount is paid during the same previous year. Thus, if such payment for any previous year is made after the close of previous year but on or before filing the return of income of that previous year, deduction shall be allowed in the previous year in which the payment is actually made.

(ii) Section 43B is not applicable on deduction covered u/s 36(1)(va).


More Topics .... " Business or Profession"
Definition of the Head ' Business or Profession'-[Sec.-28]
Compensation Received as Business Income(Section-28(ii))]
Income of a Trade or Professional Association [Section 28(iii)]
Income from Export Incentives is chargeable to Income Tax
Any Amount Received Under certain Agreement for not to Carry on Business [Section 28(va)]
Speculation Business [Explanation to Section 28]
Profit Earned from an Illegal Business
Transfer of certain Assets Specified u/s 35AD in certain circumstances [Section 28(vii)]
Certain Incomes relating to business but not taxable under the head ‘Profits Gains of Business or Profession .
Computation of Income of Business or Profession - General Important Points
General Principles - for Deductions Allowed from Gross Income of Business and Professions
Deductions from Gross Income of Business or Profession [ Section 30 to 44DB]
Expressly Admissible Deductions from Gross Income from Business or Profession [Section 30-36]
Expenditure Incurred in the Field of Scientific Research [Section 35]
Expenses on Research Activities carried on by the assessee himself
Contribution to Approved Institutions to carry on Research is Allowed as Weighted Deductions for Calculating Profits and Gains of Business or Professions.
Expenditure incurred on the acquisition of Patents Rights or Copy Rights [Section 35A] [Applicable for expenditure incurred before 1-4-1998]
Expenditure on know-how [Section 35 AB] [Applicable for expenditure incurred before 1-4-1998]
Expenditure for obtaining License to operate Telecommunication Services [Section 35 ABB]
Expenditure on eligible projects or schemes [Section 35 AC]
Deduction in respect of expenditure incurred on setting up of a Specified Business [Sec. 35AD]
Any amount given to an institution or association [Section-35CCA]
Expenditure on Notified Agricultural Extension Project [Section-35 CCC] [w.e.f. A.Y. 2013-14]
Expenditure on Notified Skill development project [Section-35 CCD] [w.e.f. A.Y. 2013-14]
Amortisation of Certain Preliminary Expenses [Section 35D]
Expenditure on demerger or amalgamation [Section 35DD]
Amortisation of Expenditure Incurred Under Voluntary Retirement Scheme [Section 35DDA]
Expenditure on Prospecting etc., for certain Minerals [Section 35E]
Other Deductions Allowed to Compute Income from Business or Profession   [Section-36]
Interest on Borrowed Capital [Sec. 36(1)(iii)].
Deduction of discount on Zero Coupon Bond [Section 36(iiia)]
Contribution to Provident and Superannuation Fund [Sec. 36(1)(iv)].
Employee’s contribution towards staff welfare schemes [Sec. 36(1)(va)]
Bad debts [Sec. 36(1)(vii)]
Bad debts of Banks, financial institution and industrial investment corporation etc. [Section 36(1)(viia)]
Special Reserve Created and Maintained by Financial Corporation [Section 36(1)(viii)].
Expenditure on Family Planning [Section-36(1)(ix)].
General Or Allowable Deductions [Section 37]
Commission earned by the agents of Life Insurance Corporation, Unit Trust of India, Post Office or Mutual Funds
Legal Expenses in the Interest of Business are Allowable Expenses
Losses incidental to Business Allowed to be Debited.
Expenses Expressly Disallowed In the Case of any ‘Assessee’ [ Section-40a]
Expenses Expressly Disallowed In the Case of any Firm [Section 40(b)]
Expenses Expressly Disallowed In General Cases [Section 40(b)]
Disallowing of certain Expenses under certain circumstances like ‘Payments to Relatives’
Payments exceeding ` 20,000 by cash/bearer cheque [Section 40A (3)].
Provision for the Payment of Gratuity – [Section-40A(7)]
DEEMED PROFITS Under Profits and Gains of Business or Professions [Section 41]
VALUATION OF STOCK for Profit and Gains of Business or Professions
Deduction Of Certain Payments Only If Actually Paid [Section 43B]
Maintenance Of Accounts By Certain Persons Carrying On Profession Or Business. [Sec. 44AA]
Compulsory Audit For The Non-Corporate Assessees [Section-44 AB]
Computation of Income on Estimated Basis [Section 44AD]
Profit from the business of carriage of goods for truck owners [Section 44 AE]
Special provision for computation of income from royalties in case of nonresidents [Section 44DA]
Partly Agricultural and Partly Business Income
Adjustment In The Profit And Loss A/C Prepared By The Assessee
Computation of Profits and Gains of a Non-Resident from Shipping Business— [Section 44B]
Computation of Profits and Gains of business of Oil Exploration [Section 44BB]
Computation of Profits and Gains of the Business of operation of Aircrafts by Non-Resident [Section 44 BBA]
Computation of Profits of Foreign Enterprises [Section 44BBB]
Ceiling Limits in respect of Head Office Expenses [Section 440]
Special Provisions in case of Income of Public Financial Institutions etc. [Section 43D]
Get.. Tally.ERP9 Book + GST Practical Assignment @ Rs.550 Tally.ERP9 Book Online Order Tally.ERP9 Book Content
© 2018 : IncomeTaxManagement.Com