Tax Compliance Made Easy: Your Guide to Section 43B
Section 43B of the Income Tax Act, 1961, deals with certain deductions that are allowed only on actual payment basis, rather than on an accrual basis. This means that for claiming deductions under Section 43B, the payment must be made within the stipulated time frame, irrespective of the accounting method followed by the taxpayer.
The section covers various payments including:
1. Payment of statutory dues:
- This includes payments like taxes, duties, cess, and fees that are payable under any law. For example, tax deducted at source (TDS), employees’ state insurance (ESI), employee provident fund (EPF), etc.
2. Payments to welfare funds:
- Contributions to certain funds such as provident funds, superannuation funds, gratuity funds, etc., are covered under this section.
3. Payments towards bonus or commission:
- If there is a liability towards payment of bonus or commission to employees, it should be paid within the stipulated time frame for claiming deduction under this section.
4. Payment of interest on loans and borrowing:
- Interest payable on any loan or borrowing from any public financial institution, scheduled bank, state financial corporation, or state industrial investment corporation is allowed as a deduction if it’s paid before the due date of filing the return of income.
It’s important to note that these payments must be actually made before the due date of filing the return of income to claim deductions under Section 43B. If not, they won’t be allowed as deductions for that particular financial year.
FAQ's
Section 43B covers certain specified expenses, including statutory dues such as taxes, duties, and cess, employee benefits like provident fund contributions, and certain other payments like interest on loans and royalties.
Expenses covered under Section 43B must be actually paid before the due date of filing the tax return for the relevant assessment year to qualify for deductions. Failure to do so may result in the disallowance of deductions.
No, expenses accrued but not paid within the stipulated timeline cannot be carried forward to subsequent years for deduction under Section 43B. They are disallowed for deduction until they are actually paid.