Expense allowable ?

This query is : Resolved

Vivek Trivedi (Querist)
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18 January 2022 Is this view correct ?
Interest on income tax - NOT allowable exp.
Interest on GST - allowable exp.(since it is compensatory in nature) while in case of income tax it is part of income tax which is itself not an allowable exp.

GST Penalty - not allowable
GST fees - allowable
TDS late fees - allowable

CA Rashmi Gandhi

CA Rashmi Gandhi (Expert)
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19 January 2022 TDS Late Fee not allowable. Other than that all correct

Vivek Trivedi

Vivek Trivedi (Querist)
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19 January 2022 One of the teaching faculties has a view that you t is nothing but fees for filing TDA return after prescribed date....

So in my opinion is that in Normal cases it would be allowed...but if the same has to be paid under a demand by ITD it would not be allowed since it would become a part of penalty and therefore penal in nature....is that view correct

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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24 July 2024 Your analysis on the treatment of interest, penalties, fees, and late fees in relation to Income Tax, GST, and TDS is generally correct, but let's clarify each point in detail:

### Interest on Income Tax:

- **Treatment**: Interest paid on delayed payment of Income Tax is **not allowable** as a deduction under the Income Tax Act, 1961. This is because Income Tax itself is not considered a deductible expense, and interest on delayed payment of tax is seen as a financial charge rather than a business expense.

### Interest on GST:

- **Treatment**: Interest paid on delayed payment of GST is generally **allowable** as a deduction. This is because GST is a business-related tax, and the interest charged on delayed payment is compensatory in nature, meant to compensate the government for the delayed receipt of tax revenue.

### GST Penalty:

- **Treatment**: Penalties imposed under GST laws are typically **not allowable** as a deduction. Penalties are punitive in nature and are imposed for non-compliance or late filing, which are not considered ordinary business expenses. Therefore, GST penalties are generally disallowed as a deduction for income tax purposes.

### GST Fees:

- **Treatment**: Fees paid for GST-related services, such as registration fees, renewal fees, or other administrative fees, are usually **allowable** as a deduction. These fees are incurred for regulatory compliance and facilitating business operations.

### TDS Late Fees:

- **Treatment**: Late fees paid for delayed filing of TDS (Tax Deducted at Source) returns are generally **allowable** as a deduction. Late fees are considered as expenses incurred to comply with TDS provisions and to avoid penalties for non-compliance. They are seen as part of the cost of ensuring timely tax compliance.

### Conclusion:

Your view aligns correctly with the general principles governing the deductibility of expenses related to Income Tax, GST, and TDS. To summarize:

- Interest on Income Tax is not allowable.
- Interest on GST is allowable.
- GST penalties are not allowable.
- GST fees are allowable.
- TDS late fees are generally allowable, except if they are imposed as a penalty by the tax authorities, in which case they would not be allowable.

Understanding these distinctions helps in proper tax planning and compliance. It's advisable to consult with a tax advisor or accountant for specific cases and any recent changes in tax laws that may affect these deductions.