Section 43B Deductions Based Actual Payments – Detailed

By VRP 0

Section 43B Deductions Based Actual Payments, As per section 43B of income tax there are certain expenses which can not be claimed as deduction unless they are actually paid.Section 43B overrides all the other sections of income tax act. In this article you can find completed details for Section 43B Deductions Based Actual Payments. Recently we provide complete details for Deduction for School Fees Paid u/s 80c, Now you can scroll down below and check complete details for “Section 43B Deductions Based Actual Payments”

If you like this article then please like us on Facebook so that you can get our updates in future ……….and subscribe to our mailing list ” freely “

Inserted by Finance Act, 2019

Special point :

  • Provision of Section 43B Shall not apply
  • for the Previous Year in which liability to pay such sum was incurred
  • If such sum is Actually Paid by Assessee
  • On or before the due date of return u/s. 139(1)
  • And evidence of such payment is furnished along with ROI

Working note : Mr. X maintains his accounts on accrual basis. He has taken a loan from a scheduled bank for the purpose of his business. Total interest liability relating to P/Y 19-20 is Rs. 40,000.

Mr. X has made the following payments. Deduction will be as follows :

Date of payment Amount(Rs.) Deduction / P/Y of deduction
15/May/19 8,000 8,000 for PY 19-20
15/Nov/19 12,000 12,000 for PY 19-20
15/April/19 5,000 5,000 for PY 19-20
15/July/19 8,000 8,000 for PY 19-20
20/Aug/20 7,000 7,000 for PY 20-21

Section 43B Deductions Based Actual Payments

Section 43B will be applicable only if incomes are chargeable to tax under section 28 i.e. under the head profits and gains from business or profession.

Section 43B says that Notwithstanding anything contained in any other provision of this Act, a deduction other- wise allowable under this Act in respect of

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

(2) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees,

(3)any sum payable by the assessee as interest on any loan or borrowing from any public finan­cial institution or a State financial corporation or a State industrial investment corporation, in accordance with the terms and conditions of the agreement governing such loan or borrowing;

(4) any sum payable as bonus or commission to employee for services rendered

(5)any sum payable by the assessee as interest on any loan or advances from a scheduled bank in accordance with the terms and conditions of the agreement governing such loan or advanc­es

(6) any sum payable by the assessee as an employer in lieu of any leave at the credit of his em­ployees.

As per this provision any amount of tax , duty , cess is allowed as deduction for computing business income they should be paid on or before the date specified by the relevant laws.

Employer’s contributions towards ”Provident fund” is allowed as deduction when it is paid to the authorities before filing the return of income.

But the deduction towards employees contribution of PF is allowed only when it is paid within the due date specified under Employees Provident fund Act.
Deduction of Gratuity available if paid before filing of return of Income.

Must Read – Deduction For Donation Under Section 80G

Circular 496 dated 25/09/1987 and 674 dated 29.12.1993 says that

1.Where the State Governments make an amendment in the Sales-tax Act to the effect that the sales tax deferred under the scheme shall be treated as actually paid, the statutory liability shall be treated as discharged for the purposes of section 43B.

2.Where the State Governments, instead of amending the Sales-tax Act, have issued Government Orders notifying schemes under which sales tax is deemed to have been actually collected and disbursed as loans then such sales tax liability as converted into loan will have similar statutory effect as can be achieved through amendments of the Sales-tax Act.

A deduction of any sum, being interest payable under point 8, shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or borrowing shall not be deemed to have been actually paid.

Must Read –