Disallowance of interest
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
11 June 2012
hi clarified me that whether overdue interest on term loan disallowed or not?
CA PARAS BAFNA
(Expert)
11 June 2012
Interest on term loan is allowable on payment basis (Section 43B).
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In case interest has been provided in the books on accrual basis and has not been paid till the due date of return filing, the assessee can not claim unpaid amount of interest as an expenditure. However, he can claim the same, in the later assessment year relevant to the previous year in which the amount of interest is paid.
.
Overdue interest is nothing but interest at higher rate which is chargeable when installments of loan or loan amount has not been paid within the stipulated time.
.
It is not penal in nature. It is just compensatory and as such it is allowable.
.
In case interest has been provided in the books on accrual basis and has not been paid till the due date of return filing, the assessee can not claim unpaid amount of interest as an expenditure. However, he can claim the same, in the later assessment year relevant to the previous year in which the amount of interest is paid.
.
Overdue interest is nothing but interest at higher rate which is chargeable when installments of loan or loan amount has not been paid within the stipulated time.
.
It is not penal in nature. It is just compensatory and as such it is allowable.
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