Section 43b(h) vs Section 194Q of Income Tax Act, 1961

Section 43b(h) vs Section 194Q of Income Tax Act, 1961


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Quick Summary
This discussion clarifies the reporting of outstanding balances for micro and small enterprises when TDS under Section 194Q hasn't been deducted. It explores the implications of both Section 43B(h) and Section 194Q, suggesting that if payment is overdue according to the MSMED Act, the entire amount should be disallowed under 43B(h) and reported in Tax Audit Report 3CD. If TDS is not deducted at the time of payment, Section 40(a)(ia) might apply, leading to a 30% disallowance.

When neither the buyer pays the outstanding
balance of micro and small enterprises and nor
they deduct the TDS under section 194Q of
Income Tax Act, 1961, then what will be the
proceedure of reporting of outstanding balance in Tax Audit Audit Report


In my opinion, for true and fair view purposes of
Tax Audit Report, 70% of outstanding balance is
to be shown under section 43b(h) and remaining30% to be shown under Section 40(a)(ia) of theIncome Tax Act,1961.


Waiting for suggestions, if you thinks that this is
not the right way

When the buyer has not paid the amount then there is no tds implications under 194Q as the time for deduction is at the time of payment

and when he makes the payment and not deducted tax then 40a(ia) gets attracted and 30% disallowance gets attracted for the buyer

Further 43b(h) where dues towards micro and small enterprises have passed the due date as per MSME Act then the entire amount is disallowed and will only be allowed in the year of payment. so 100% should be shown in the 3CD report

that is my opinion

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