Amount Not Allowable as Deduction Section 40A: In 1961, the Income Tax Act was enacted. Profit or gain derived from a business or profession is considered income and is subject to taxation. Expenses incurred in business or work might be deducted from the revenue generated by the business or profession. However, there are several limitations to such expense deductions. Certain expenses are not eligible for a tax deduction. It was stated in Sections 40 and 40A of the Income Tax Act of 1961. Section 40(a) is explained in this article.
The following sum is not allowable as a deduction for calculating the income payable under the heading Profit & gains of business or professions:
- Any Interest, Royalties, Fees for Technical Services, Or Any Other Payment Chargeable In The Recipient’s Hands Under The Act And Payable
- 30% Of Any Amount Payable To A Resident
- Any Amount Paid To The Government As A Result Of Income Tax
- If The Payment Is Made Outside Of India Or To A Non-Resident, It Is Charged Under The Heading “Salaries”
Any Interest, Royalties, Fees for Technical Services, Or Any Other Payment Chargeable In The Recipient’s Hands Under The Act And Payable
- outside of India
- to a non-resident (not a corporation) or a foreign firm in India
on which –
- Tax is required to be deducted at source, but it has not been deducted at source, or
- has not been paid on or before the due date provided in sub-section (1) of section 139 [Amended w.e.f A.y 2015-16].
However, such a payment may be deducted from one’s income in the year in which it was deducted and paid.
- Tax is supposed to be deducted at the source, but it hasn’t been.
- has not been paid on or before the due date for filing a return of income under section 139 after such deduction (1)
The amount that is denied, on the other hand, is allowed as a deduction in calculating the income of the following year in which it was deducted and paid. Provided, however, that if an assessee fails to deduct all or part of the tax and the payee deposits the self-assessment tax directly, the assessee is presumed to have deducted and paid the tax on such sum on the date of the resident payee’s report of income.
Any income tax paid outside of India eligible for tax relief under sections 90, 90A, or 91 is not deductible. In addition, if you borrow money to pay your taxes, the interest you pay on that money isn’t deductible.
- Sum paid for wealth tax account.
- Any money paid as a royalty, licence fee, service fee, privilege fee, service charge, or any other fee or charge, by whatever term called, levied only on;
- the amount appropriated, directly or indirectly, from a State Government undertaking by the State Government. A State Government undertaking includes
- a corporation established by or under any Act of the State Government;
- a company in which the State Government owns more than fifty per cent of the paid-up equity share capital;
- a company in which the entity referred to in clause (i) or clause (ii) owns more than fifty per cent of the paid-up equity share capital (individually or collectively);
- a company or corporation in which the State Government has the authority, directly or indirectly, to nominate the majority of the directors or to control the management or policy choices, whether through shareholding or management rights, shareholders agreements, voting agreements, or any other means;
- an authority, a board, an institution, or a body created or founded by or under any State Act, or owned or managed by the State Government;
If The Payment Is Made Outside Of India Or To A Non-Resident, It Is Charged Under The Heading “Salaries”
If the tax has not been deducted at source, and if it has been deducted, it has not been paid. Even if tax is deducted on such an income in a subsequent previous year, such a salary is not allowable as a deduction in that year.
- Unless the assessee has made practical arrangements to secure that tax, any payment made by the employer to a provident fund or other fund established for the benefit of the assessee’s employee shall be deducted at source from any payments made from the fund that are taxable under the head “Salaries.”
- Any non-monetary perquisites tax that the employer has really paid.