29 July 2023
Payments Under Section 43B In a broader sense, there are 7 types of payments that come under the purview of Section 43B of Income Tax Act – Fundamentally, it is the amount paid by the employer towards employee welfare funds like – gratuity, provident funds, superannuation fund, etc. Sum of money paid by the assessee in the form of tax, cess or duty to the government. Further, interest paid on these taxes qualifies for deductions. Amount of money paid to employees as a bonus or commission for the services rendered. However, it does not include dividends paid out to shareholders. Interest amount that has to be paid on advances and loans availed. Notably, such financial assistance should have been availed from scheduled banking institutions as per the terms and conditions of concerning agreements. The amount of money paid for encashing the employee’s leave balance. One can claim the taxpayer’s payout to Indian railways as an expense. However, to do so, it has to be remitted to Indian railway accounts from the fiscal year of 2016-17. In case payments are remitted post due date of submitting returns for a given year then the specific expense would be permitted in the year of actual payment. It is the amount of money paid on the loans that were availed form state financial corporations or public financial institutions. However, such loans must have been availed as per the guidelines prescribed. One must note that according to the provisions of the Sales Tax Act, the amount of sales tax that was deferred under an incentive plan is considered to be paid to meet the requirements of Section 43B. Furthermore, when the interest earnings mentioned in clause 4 and 5 are converted into a loan, such conversions are not considered interest payment eligible for deductions. This further makes it vital for individuals who generate earnings from business or profession and maintain their accounts on the mercantile basis to become aware of Sec 43B‘s provisions.
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