Under section 40(a)(ia) of the Act, in case of payments made to resident, the deductor is allowed to claim deduction for payments as expenditure in the previous year of payment, if tax is deducted during the previous year and the same is paid on or before the due date specified for filing of return of income under section 139(1) of the Act. 

In case of non-deduction or non-payment of tax deducted at source (TDS) from certain payments made to residents, the entire amount of expenditure on which tax was deductible is disallowed under section 40(a)(ia) for the purposes of computing income under the head “Profits and gains of business or profession”. The disallowance of whole of the amount of expenditure results into undue hardship.

In order to reduce the hardship, it is proposed that in case of non-deduction or non-payment of TDS on payments made to residents as specified in section 40(a)(ia) of the Act, the disallowance shall be restricted to 30% of the amount of expenditure claimed.

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  1. S Ahmed says:

    Filing of E-TDS returns through third party agencies.
    Digital signature extremely expensive and to be obtained from third parties.

    1) There seems to be nexus and curruption. These facilities should be provided by Income Tax Department free of cost. Please file RTI applications and drag the Govt to Apex Court.

    2) There should be no penalty or interest for non compliance where services are to be taken from third parties.

  2. Vijaydeep Singh says:

    if deductor doesnot pay the TDS amount thereafter, then 70% expense claim will be disallowed later on or not. Act is not cleared on that point.

  3. HARSHADRAI says:

    Very good. Hon’ble F.M. should amend 234E. Deductor is unpaid servant of Govt. For Honorary work there should be no late fee. If Govt. introduce TDS CHALLAN-CUM-FORM NO.16A then all problem will be solved, all the details are available in above challan no need to file 26Q etc.No mismatch.

  4. sharma says:

    Dear sir,

    Sec. 40(a)(ia) of the Act covers covers following payments
    1. interest
    2. Commission or brokerage
    3. Fee for technical services
    4. Fee for professional services
    5. payment ot contractors/sub contractor
    6. Rent
    7. Payment of Royalty to a resident

    now what would be disallowance in case of non deduction/non payment of tds in other section i.e. salary (192), winning from lottery (sec 194B), winning from horse race (194BB), insurance comm. (194D) etc.

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