Query on income tax disallowance

You're referring to a situation where: - Interest paid on a business loan is ₹1 crore - No TDS was deducted under Section 194A - ₹30 lakhs is disallowed under Section 40(a)(ia) - Only ₹70 lakhs is shown as interest paid in the Profit & Loss (P&L) statement - The remaining ₹30 lakhs is written off to the capital account In this case, you are still liable to disallow 30% on the ₹70 lakhs shown in the P&L statement, as per Section 40(a)(ia). The disallowance is calculated on the interest expense claimed in the P&L statement, which is ₹70 lakhs. Therefore, the disallowance would be ₹21 lakhs (30% of ₹70 lakhs). The fact that you have written off the remaining ₹30 lakhs to the capital account does not impact the disallowance calculation. Please note that this is a complex area of taxation, and it's always best to consult a tax professional or chartered accountant for personalized advice.

Non-deduction of TDS on interest:
• Interest paid (Rs 1 crore) to residents without deducting TDS under 194A: Sec 40(a)(ia) disallows 30% (Rs 30 lakh) in that year. It's allowed in the year the TDS is deducted and paid.
• If the payee has filed an ITR including this income and paid tax (Form 26A certificate), no disallowance (second proviso to 40(a)(ia)), and you're not an assessee in default (201(1) proviso). Interest under 201(1A) is still payable until the payee's ITR date.
• If the payee is a bank or exempt institution, no TDS is required anyway.
• If the payee is a non-resident, Sec 40(a)(i) disallows 100%.