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Section 43B: Deduction of certain payments only if actually paid

Ritik Chopra 
on 06 May 2021

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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 an accrual basis in any earlier previous year, it will not be allowed again in the year in which it is actually paid.

Section 43B: Deduction of certain payments only if actually paid

Now let us discuss what these payments include. These payments include:

(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 loan or borrowing from a deposit taking non-banking financial company or systemically important non-deposit taking non-banking financial company, in accordance with the terms and conditions of the agreement governing such loan or borrowing. [W.e.f. A.Y. 2020-21]

(f) any sum payable by the assessee as interest on any term loan from a scheduled bank or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank in accordance with the terms and conditions of the agreement governing such loan.

 

(g) 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 provisions of section 43B.

(h) Any sum payable by the assessee to the Indian Railways for the use of railway assets.

Now let us discuss how these payments shall be allowed. According to the provisions of Section 43B 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 the 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 the due date, these shall never be allowed.

(iii) If all the above payments are paid after 31st March but before the 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 the 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.


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