Disallowance of Interest on TDS

Chartered Accountant

Hi all Can any one tell me the section under which the Interest paid on TDS is disallowed Thanks

its under section 40 (a) (ia)

Total likes : 1 times

Chartered Accountant

Thanks for the reply, But section 40(a)(ia) disallows the expense on which TDS had to be deducted if the same was not deposited before the due date of filling of the return

Interest paid for delay deposit of TDS is allowable expnse.

Only those expense which are penal in nature are disalowed.




Total likes : 1 times

Tax Professional and in Service

Dear Mohemmed,


Interest on late payment of TDS is disallowed under section 37(1) of the income tax act.


Although Sec 37(1) provided for the allowability of general expenses incurred for business, it also mentions certains exceptions for which no allowance for expenses under income tax act.






Total likes : 1 times



Good morning............
Welcome to this forum.....
the non-payment of TDS by an assessee entails disallowance of the expenditure.In a case , where the receipient already paid tax and filed its return, the  TDS liability is abated u/s.191 Whether the disallowance u/s.40(ia)is still applicable because  during the relevant previous year there existed liability to make TDS.That once the payee paid the tax and there is no need for making TDS as per the sec.191,it must satisfy the requirement of sec.40(ia).In other words , there is no separte liabiity to make TDS  u/s.40(ia).This provision needs elaboration and the opinion of my learned brethern and  any judgments sofar may please be posted at the earliest.
thank you
c.sai prasad.

addition on 24,11.2008

Sec.40a(ia) doesnot disallow the corresponding expenditure but provides that if the TDS is paid in the subsequent years,exp.would be allowed in that subsequent year.Therefore,it implies that where the payee didnot pay tax and the liability to make TDS remians on the payer,it must be paid though in a subsequent year in order to get deduction.Otherwise,making TDS  where payee already paid directly would  amount to paying tax twice and it is not intended.It looks unconvincing that even if payee had  already paid tax, the payer in order to get deduction must make another payment of TDS in favour of the payee.This needs to be kept in view in evaluating the issue.
Have a nice day......
Thank you for sharing with us.....
regards ,


please teel me

interest on late payment of TDS is disallowable

under which clause of tax audit we can disclouse that



Yes, manoj B Gavali is Right.

if any Interest paid for delayed payment of Tax is Debited in P&L A/C, then it should be Disallowed u/s 37(1) of the Income Tax Act 1961

for Your Reference please see Judicial Analysis No.349 in the following attachment, Thank you

Attached File : 883559 1183019 direct taxes circular sec 371 1 349.pdf downloaded 6329 times
Student CA Final

It is disallowable as per SC Ruling


Refer  Bharat Commerce & Industries v. CIT (1998) 230 ITR 733 (SC)

Working in a C.A Firm

Int on late payment of tds .& late fillin fees u/s 234E ..reported under clause no. 21(a) which is penalty for violation of any law.



Your are not logged in . Please login to post replies

Click here to Login / Register