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INTEREST ON TDS allowability as expense

V V N Machara Rao Tavva (Student) (31 Points)

14 September 2009

Sir, can u pls guide me on the issue of Allowance of Expense Towards Payment of Interst on TDS.

1) is it an allowable expense under the Act.

2) if so, please let me know the section No. and Notifications by CBDT if any.

Thank you for helping me.

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15 Replies

CA. Megha Topiwala (Job) (1534 Points)
Replied 14 September 2009

Interest towards the late payment of TDS is not allwoed as expense....

Ankit Gupta (Asst Manager) (22 Points)
Replied 14 September 2009

Interest on TDS is not a allowable enpenditure.

Infact any type of interest piad under Income tax Act 1961 is not allowable.

Refer Sec 40(a) or 37

Max Payne (employed) (2569 Points)
Replied 14 September 2009

Interest on TDS is treated as penal in nature. U cant claim the same

(Guest)

Do you mean late filing penalty on TDS??

Dude, As far as I know, all types of penalties, interest for late payments were not allowed as an expense.

Simple rule is that "all expenses incurred for the business/profession" can be shown as deduction

extra expenses incurred for business/prof. due to the mnanagement delay that is not allowed as an expense..

For ex: Insurance policy remium - Rs.1000 late payment fee Rs.150.

Total premium paid is Rs.1150

While computation of Income of individual/Buss./Prof. only Rs1000 can be shown as a deduction but not Rs.1150

Warm Regards

-Ram

(Guest)

NOT ALLOW

Late CA Sampat Jain (Chartered Accountant) (4772 Points)
Replied 15 September 2009

Payment of income-tax is not deductible as per section 40(a)(ii); hence, interest under sections 139, 215 and 217 which is to be regarded as accretion to tax, cannot also be allowed to be deducted - Assam Forest Products (P.) Ltd. v. CIT [1989] 180 ITR 478 (Gauhati).

Note : On the same principle, interest payable under sections 220(2), 234A, 234B or 234C is also not deductible

section 40(a)(ii) disallows only tax on profits and gains of business

CA Sumit Arora (CA) (1410 Points)
Replied 15 September 2009

Interest on TDS will not be allowed as expense.

CA.Parsun Garg (JOB) (1380 Points)
Replied 15 September 2009

Dear,

Interest on TDS is in the nature of Penal Interest, so it will not be allowable as business expenditure.

Mayank kharbanda (Risk Advisory Services) (409 Points)
Replied 15 September 2009

@ Ram da one & Ankit Gupta.......

All interest which are penal in nature are not disallowed under income tax act....

interest on service tax, sales tax are allowed expenditure under income tax act....

@ Ram da one......

da example which u have given is not correct.....aise toh sir aap interest on bank loan bhi disallowed kar denge.......

Dintakurthi Tirumala (CA FINAL) (15989 Points)
Replied 16 September 2009

Interest paid on TDS not Allowed as expenditure.TDS,income tax,advance tax and FBT does not allowed as expendiure U/S 40a(ii) the same concept will apply to interest paid on TDS. interest will be charged on TDS for late payment or late filing of TDS so the expenditure occures mistak of us not a normal business expenditure so not allowed as expenditure

Thank you

CA.Parsun Garg (JOB) (1380 Points)
Replied 16 September 2009

My Dear Mayank,

Interest on Bank Loan is not of Penal Nature interest ............ & both r not at all compareable

Max Payne (employed) (2569 Points)
Replied 16 September 2009

Originally posted by :Mayank kharbanda
"	@ Ram da one & Ankit Gupta....... All interest which are penal in nature are not disallowed under income tax act.... interest on service tax, sales tax are allowed expenditure under income tax act.... @ Ram da one...... da example which u have given is not correct.....aise toh sir aap interest on bank loan bhi disallowed kar denge.......	"

My dear friend

Interest on sales tax and service tax are compensatory in nature. Not Penal.

Express Penalty imposed by an Act or by an officer cannot be allowed as expense.

@ Ram da one

Expenses which are penal for contravention of a law are disallowed. If the penalty is for violating the terms of a contract like repaying a loan, then there is no disallowance

CA.Parsun Garg (JOB) (1380 Points)
Replied 17 September 2009

yes dear you are correct, then tell me what is nature of interset paid for contravention of provisions of TDS payment/deposit under income tax act.

Deepak Gupta (Associate Manager) (21 Points)
Replied 26 March 2010

yes, in short we can say that any direct tax payments like TDS,Advance Tax ,Income Tax & Wealth Tax alonwith its interest is not allowed as deduction while computing the taxable income under income tax act. where as interst paid on indirect tax payments like service tax, excise. is allowed as deduction.