Section 43B CERTAIN DEDUCTIONS ALLOWED ON ACUTUAL PAYMENT BASIS

Section 43B CERTAIN DEDUCTIONS ALLOWED ON ACTUAL PAYMENT BASIS

Applicability of Section 43B

•                        Section 43B is applicable where the assessee maintains his books of accounts on the basis of mercantile system of accounting (ie accrual basis).

•                        Section 438 cannot apply in situations where the assessee follows cash basis of accounting (because under cash accounting system, all expenses are allowed on actual payment basis)

Types of Expenses to be Allowed on Actual Payment Basis Only

•                        Any sum payable by way of tax, duty, cess or fee (by whatever name called under any law for the time being in force);

•                        Any sum payable to the Indian Railways for use of the Railway assets;

•                        Employer's contribution to provident fund, superannuation fund or any other fund for the welfare of the employees;

•                        Bonus, commission or leave salary payable by the employer to his employees; and

•                        Interest on loan taken from: 1:1 a scheduled bank including a co-operative bank;

❑          public financial institution (ie, ICICI, IFCI, Mei, LIC, UTI, etc);

❑          state financial corporation; or

❑          state industrial investment corporation.

Last Date of Payment

•                        The above mentioned expenses can be paid till the last date of filing of return of income relating to the previous year in which the expenditure was incurred. If the payment is so made, expenditure is allowed in the previous year itself.

•                        If the payment is made after the last date of filing of return of income, expenditure is allowed in the year in which the payment was made.

Example: XYZ Ltd has taken a loan from 581. on which interest of Rs 5,000 is payable for PY 2017-18. If this interest was paid to 58I on or before 30.09.2018, such interest would be allowed to be deducted in PY 2017-18 itself. However, if this interest was paid on or after 01.10.2018, such interest would be allowed to be deducted in the previous year in which such payment was made.

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