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Disallowance U/s 40(a)(ia) restricted to 30% of sums paid

 Union Budget 2014-15  (1)
An Amendment proposed by Budget 2014 :- Disallowance U/s 40(a)(ia) restricted to 30% of sums paid :- Presently any interest, commission, brokerage, rent, royalty, fees for professional or technical services payable to a resident, payments to resident contractor or sub contractor are fully disallowed if tax was deductible on such sums but not deducted or not paid before due date specified U/s 139(1).
     Presently no disallowance U/s 40(a)(ia) is made for non deduction of TDS on payment of salary or directors remuneration or purchase of immovable property (Sec. 194IA).

Now “All expenses” on which tds is deductible and not deducted or deducted but not deposited before due date specified U/s 139(1), then 30% of such  expenses will be disallowed U/s 40(a)(ia), therefore salary and directors remuneration, purchase of immovable property exceeding Rs. 50 Lakh by a builder or colonizer are also covered now and disallowance is restricted to 30%.

 And such disallowed 30% sum will be allowed in the subsequent previous year :- (i) in which such tds has been deducted and deposited or (ii) in the year in which such tds has been deposited, if it was deducted in the previous year but paid after due date specified U/s 139(1).

Deductor can alternatively furnish form No. 26A as required by second proviso to Sec. 40(a)(ia) from the recipient of sum, but it has to be seen that the recipient has filed his/its income tax return within the due date applicable to payer of sum, otherwise it will be disallowed in the this year and will be allowed in the following year, when the recipient has filled his/ its return.


  1. Anonymous1:37 PM

    Why was it done? What are the benefits to the department?


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