Amount not deductible under section 40(a) of Income Tax Act 1961


(A) The following amounts shall not be allowed as deduction in computing the income chargeable under the head Profit & gains of business or professions as per section 40(a)

  1. Any interest, royalty or fees for technical services or any other sum chargeable in the hands of the recipient under the Act which is payable outside India or in India to a non-resident (not being a company) or to a foreign company

on which


a) Tax is required to be deducted at source and such tax has not been deducted at source or

b) TDS deducted has not been paid on or before the due date specified in 139(1) of income tax act.


However, such sum shall be allowed as a deduction in computing the income of the subsequent year in which it has been so deducted and paid.


(B). Thirty percent of any sum payable to a resident, on which


a. Tax is required to be deducted at source and such tax has not been deducted at source or b. TDS deducted has not been paid on or before the due date specified in 139(1) of income tax act.

Will be disallowed from claiming deduction.


However, the amount which is disallowed shall be allowed as a deduction in computing the income of the subsequent year in which it has been so deducted and paid.


Note:

Provided that where an assessee fails to deduct the whole or any part of the tax and the payee has deposited the self assessment tax directly then it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing return of income by the resident payee.


(C) Any payment which is chargeable under the head “Salaries”, if it is payable

  1. Outside India or

  2. to a non-resident

and if the tax has not been deducted at source or deducted but not paid, then it will be fully disallowed as expenditure.

Note: Even if tax is deducted on such salary in subsequent previous year, such salary shall not be allowed as deduction in that previous year.

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