Section 40(a)(ia)

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p.Damodaram (Querist)
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05 March 2010 Kindly clarify me the present and proposed amendment in this section.

According to me even though TDS is not deducted and not paid before the filing return of income expenditure can be claimed without any disallowance.

Thanks

Pradeep Kumar

Pradeep Kumar (Expert)
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05 March 2010 What makes you think that TDS if not deposited to the credit of Govt. would not call for disallowance of expenditure.

p.Damodaram

p.Damodaram (Querist)
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05 March 2010 Dear sir,

As per Current budget there is one clause regarding - Section 40(a)(ia) stating that " It is proposed to AMEND that said section to provide that no disallowance will be made If after deduction of tax during the previous year, the same has been paid on or Before the due date of filing of return of income specified in sub section (1) 139.

if there is no change why it is said It is proposed to AMEND

thank you

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CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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05 March 2010 According to me the proposed amendment only the amount deducted and not paid on or before the due date not about TDS amount not deducted

Pradeep Kumar

Pradeep Kumar (Expert)
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05 March 2010 First of all, read the following:
The existing provisions of section 40(a)(ia) of Income-tax Act provide for the disallowance of expenditure like interest,
commission, brokerage, professional fees, etc. if tax on such expenditure was not deducted, or after deduction was not paid
during the previous year. However, in case the deduction of tax is made during the last month of the previous year, no disallowance
is made if the tax is deposited on or before the due date of filing of return.
It is proposed to amend the said section to provide that no disallowance will be made if after deduction of tax during the
previous year, the same has been paid on or before the due date of filing of return of income specified in sub-section (1) of section
139.
This amendment is proposed to take effect retrospectively from 1st April, 2010 and will, accordingly, apply in relation to the
assessment year 2010-11 and subsequent years.

The above matter is straight from the Memorandum of Budget. If you read it carefully, then earlier for expenditure incurred upto Feb 28, TDS was to be deposited till year end. And for expenditure of March, it could have been deposited till Return filing date, to avoid disallowance.

Now, the amendment states that irrespective of when the expenditure was incurred, if TDS is deposited till return filing date, there would be no disallowance.