As per existing provisions of Section 40(a)(ia) of the Act, certain payments made to residents were not allowable as deduction where tax was not deducted or after deduction, was not paid before end of the year. In case where the tax was deducted in the last month of the year, then no disallowance u/s. 40(a)(ia) would be made, so long as the tax was deducted during the year and paid before the due date of filing the return of income.

It is now proposed that so long as the tax is deducted during the year and it is also paid on or before the due date of filing the return of income, then no disallowance will be made u/s. 40(a)(ia) of the Act. However, it must be kept in mind that in any case, the deduction of TDS is required to be made on or before the end of the year. If there is a failure to deduct tax, the disallowance will be made, notwithstanding the fact that the tax has been deducted after end of the year and paid before the due date.

This amendment will take effect retrospectively from 1st April, 2010, and will, accordingly, apply in relation to the assessment year 2010-2011 and subsequent years.

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  1. ssmohideen says:

    The Finance Minster, the CBDT and the IT department are keen to prevent any revenue leakage by bringing such provisions on statutes. However none thses estates seem to be bothered about the crores of rupees held up with the Department as ” REFUND DUE”. While may tax evaders make their life happy by not paying a Rupee to the revenue kit, the honest tax payers are struggling and suffering to get the legitimate refund. It has become an un writen code for the IT Departments not to issue refund in the last quartes of the financial years. Let the welfare state be lit bit honest in ensuring the quick process of refunds. No action is taken on the erreing officers who do not process refunds within the ” prescribed ? ” period. Unles the officers are charged for the negligence for non issue of refunds in time , one can not expect any improvement in the present sluggishnes in the refund matter.

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June 2021