DEDUCTIBILITY OF EXPENDITURE WHERE TDS HAS NOT BEEN DEDUCTED

DEDUCTIBILITY OF EXPENDITURE WHERE TDS HAS NOT BEEN DEDUCTED

Section 40(a)(i)

Interest, Royalty, FTS, etc Payable Outside India/Payable to Non-Resident Applicability of Section- 40(a)(i) - Conditions

                   The amount is paid/payable:

          to any person outside India; or

          to a non-resident in India or a foreign company in India.

                   The amount paid is in the nature of interest, royalty, fees for technical services or any other sum.

                   Such amount is chargeable to income tax in the hands of the recipient under the Income Tax Act, 1961 and TDS is required to be deducted u/s 195 or any other section.


When Disallowance is Applicable

Interest, royalty, etc would be disallowed in the following two cases:

                   Case 1: Tax has not been deducted at source in the current year; or


                   Case 2: Tax has been deducted at source during the current year but has not been deposited with the government till the last date of submission of return u/s 139(1).


Amount of Disallowance

The entire amount of interest, royalty, fees for technical services shall be disallowed in the current year if either of the above two cases gets attracted.


Reversal of Disallowance

The  amount  which  is  disallowed  in the current year shall be allowed as deduction in the year in which tax deducted at source is deposited with the government by the pave,.

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