Bonus provision.

This query is : Resolved

anckoora (Querist)
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13 August 2011 Dear Sir,

Ours is a partnership firm.On every year on 31st march, we make provision for Bonus to employees @ 8.33%. And in subsequent financial year in Diwali time, we pay it.

As per Income Tax Act, any provision made on 31st march, has to be paid within six months of financial year-end OR before filing of ITR for that financial year. IS THIS RIGHT ? Now, diwali comes after 7 or 8 months of financial year-end. Can Income Tax officer disallow this bonus expense ?
According to The Payment of Bonus Act 1965, it has to be paid within 8 months of closing of financial year - which we do.
So, some confusion here.
pl. advise.
thanks
anckoora.

CA Ashwani Agarwal

CA Ashwani Agarwal (Expert)
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13 August 2011 Yes the income tax officer can disallow it if you pay it after filing your ITR under section 43B.

But according to the same section, the ITO will have to allow it in the year you have paid it. So if you dont pay it in time then no claim in the previous year ending 31st march but it will be allowed in the year you are paying the same.