Time limit to pay to Unpaid Creditors under income tax act

Save Share

This query is : Resolved

Quick Summary

This discussion addresses the time limits for paying sundry creditors under the Income Tax Act. While there's no explicit time limit, unpaid amounts can remain on the balance sheet. If the reason for non-payment isn't satisfactorily explained, especially during scrutiny, the Income Tax Officer may invoke Section 41(1) and add the outstanding amount to your income, typically after several years.

Pankaj

Pankaj (Querist)

21 October 2021 Respected sir,
Actually I had shown sundry creditors of Rs 1000000/- in F Y 18-19. But still I have not paid them.
Is any time limit to pay to unpaid creditors under income tax ?
If i will not pay to them to some more years , what will the effect ?
Is any rule to add such unpaid creditors amount to income ?

Please give your valuable response

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

22 October 2021 1.As such no.
2. Will continue to reflect in Balance Sheet, until you add back it to P&L acc.
3. ITO may impose sec. 41(1) of it act, and add the amount to income.

Pankaj

Pankaj (Querist)

22 October 2021 Thanks sir
but any time limit u/s 41(1) to add the same amt in income ?

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

22 October 2021 Usually during scrutiny, if reason for the non-payment not satisfactorily replied.
No specific time limit in the act, but roughly after 7/8 years...

Pankaj

Pankaj (Querist)

22 October 2021 Thanks Sir.
Thanku very much

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now