Section 43B - Certain deductions to be only on actual payment - Income-tax Act, 1961

1 [Certain deductions to be only on actual payment. 43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- 2 [ ( a ) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or ] ( b ) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, 3 [ or ] 4 [ ( c ) any sum referred to in clause ( ii ) of sub-section (1) of section 36, ] 5 [ or ] 6 [ ( d ) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution 7 [ or a State financial corporation or a State industrial investment corporation ] , in accordance with the terms and conditions of the agreement governing such loan or borrowing 8 [ , or ] 33 [ (da) any sum payable by the assessee as interest on any loan or borrowing from 41 [ such class of non-banking financial companies as may be notified by the Central Government in the Official Gazette in this behalf ] , in accordance with the terms and conditions of the agreement governing such loan or borrowing, or ] 9 [ ( e ) any sum payable by the assessee as interest on any 10 [ loan or advances ] from a scheduled bank 31 [ or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank ] in accordance with the terms and conditions of the agreement governing such loan 11 [ or advances ] , ] 12 [ or ] 13 [ ( f ) any sum payable by the assessee as an employer in lieu of any leave at the credit of his 29 [ employee, or ] ] 30 [ (g) any sum payable by the assessee to the Indian Railways for the use of railway assets, 42 [ or ]] 43 [ (h) any sum payable by the assessee to a micro or small enterprise beyond the time-limit specified in section 15 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006.), ] shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him : 14 [Provided that nothing contained in this section 44 [ [except the provisions of clause (h)] ] shall apply in relation to any sum 15 [ *** ] which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return. 16 [ *** ]] Explanation 17 [ 1 ]. -For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause ( a ) or clause ( b ) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1983, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.] 18 [ Explanation 2 . -For the purposes of clause ( a ), as in force at all material times, any sum payable means a sum for which the assessee incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law. ] 19 [ 20 [ Explanation 3 ]. -For the removal of doubts it is hereby declared that where a deduction in respect of any sum referred to in clause ( c ) 21 [ or clause ( d ) ] of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him. ] 22 [ Explanation 3A . - For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause ( e ) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1996, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him. ] 34 [ Explanation 3AA .- For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (da) is allowed in computing the income referred to in section 28, of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 2019, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him. ] 23 [ Explanation 3B . - For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause ( f ) of this section is allowed in computing the income, referred to in section 28, of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 2001, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him. ] 24 [ Explanation 3C . - For the removal of doubts, it is hereby declared that a deduction of any sum, being interest payable under clause ( d ) of this section, shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or borrowing 38 [ or debenture or any other instrument by which the liability to pay is deferred to a future date ] shall not be deemed to have been actually paid. ] 35 [ Explanation 3CA .- For the removal of doubts, it is hereby declared that a deduction of any sum, being interest payable under clause (da), shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or borrowing 39 [ or debenture or any other instrument by which the liability to pay is deferred to a future date ] shall not be deemed to have been actually paid. ] 25 [ Explanation 3D . - For the removal of doubts, it is hereby declared that a deduction of any sum, being interest payable under clause ( e ) of this section, shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or advance 40 [ or debenture or any other instrument by which the liability to pay is deferred to a future date ] shall not be deemed to have been actually paid .] 26 [ Explanation 4 . - For the purposes of this section,- ( a ) public financial institutions shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956); 27 [ ( aa ) scheduled bank shall have the meaning assigned to it in the Explanation to clause ( iii ) of sub-section (5) of section 11; ] ( b ) State financial corporation means a financial corporation established under section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951); ( c ) State industrial investment corporation means a Government company within the meaning of section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providing long-term finance for industrial projects and 28 [ eligible for deduction under clause ( viii ) of sub-section (1) of section 36 ] . ] 32 [(d) co-operative bank , primary agricultural credit society and primary co-operative agricultural and rural development bank shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P. ] 36 [ 45 [ (e) micro enterprise shall have the meaning assigned to it in clause (h) of section 2 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006.); ] (f) non-banking financial company shall have the meaning assigned to it in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934.); 46 [ (g) small enterprise shall have the meaning assigned to it in clause (m) of section 2 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006). ]] 37 [ Explanation 5 . For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply and shall be deemed never to have been applied to a sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 applies. ] ---------------------------------- Notes :- 1. Inserted by the Finance Act, 1983, w.e.f. 1-4-1984. 2. Substituted by the Finance Act, 1988, w.e.f. 1-4-1989. 3. Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. 4. Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. 5. Inserted by the Finance Act, 1988, w.e.f. 1-4-1989. 6. Inserted by the Finance Act, 1988, w.e.f. 1-4-1989. 7. Inserted by the Finance Act, 1990, w.e.f. 1-4-1991. 8. Inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997. 9. Inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997. 10. Substituted for term loan by the Finance Act, 2003, w.e.f. 1-4-2004. 11. Inserted by the Finance Act, 2003, w.e.f. 1-4-2004. 12. Inserted by the Finance Act, 2001, w.e.f. 1-4-2002. 13. Inserted by the Finance Act, 2001, w.e.f. 1-4-2002. 14. Inserted by the Finance Act, 1987, w.e.f. 1-4-1988. 15. Words referred to in clause (a) or clause (c) or clause (d) or clause (e) or clause (f) omitted by the Finance Act, 2003, w.e.f. 1-4-2004. Earlier the quoted words were amended by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989, Finance Act, 1988, w.e.f. 1-4-1989, Finance (No. 2) Act, 1998, w.r.e.f. 1-4-1997 and Finance Act, 2001, w.e.f. 1-4-2002. 16. Second proviso omitted by the Finance Act, 2003, w.e.f. 1-4-2004. Prior to its omission, the second proviso, as substituted by the Finance Act, 1989, w.e.f. 1-4-1989, read as under: Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date. 17. Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. 18. Inserted by the Finance Act, 1989, w.r.e.f. 1-4-1984. 19. Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. 20. Renumbered by the Finance Act, 1989, w.r.e.f. 1-4-1984. 21. Inserted by the Finance Act, 1988, w.e.f. 1-4-1989. 22. Inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997. 23. Inserted by the Finance Act, 2001, w.e.f. 1-4-2002. 24. Inserted by the Finance Act, 2006, w.r.e.f. 1-4-1989. 25. Inserted by the Finance Act, 2006, w.r.e.f. 1-4-1997. 26. Substituted by the Finance Act, 1990, w.e.f. 1-4-1991. Prior to substitution, Explanation 4 was inserted by the Finance Act, 1988, w.e.f. 1-4-1989 and amended by the Finance Act, 1989, w.r.e.f. 1-4-1984. 27. Substituted by the Finance Act, 1999, w.e.f. 1-4-2000. Prior to its substitution, clause (aa), as inserted by the Finance (No. 2) Act, 1996, w.e.f. 1-4-1997, read as under : '(aa) scheduled bank shall have the meaning assigned to it in clause (ii) of the Explanation to clause (viia) of sub-section (1) of section 36;' 28. Substituted for approved by the Central Government under clause (viii) of sub-section (1) of section 36 by the Finance Act, 2000, w.e.f. 1-4-2000. 29. Substituted vide THE FINANCE ACT, 2016 w.e.f. 1st day of April, 2017, before it was read as, employee 30. Inserted vide THE FINANCE ACT, 2016 w.e.f. 1st day of April, 2017 31. Inserted vide THE FINANCE ACT, 2017 w.e.f. 1st day of April, 2018 32. Inserted vide THE FINANCE ACT, 2017 w.e.f. 1st day of April, 2018 33. Inserted vide FINANCE (NO. 2) ACT, 2019 w.e.f. 01-04-2020 34. Inserted vide FINANCE (NO. 2) ACT, 2019 w.e.f. 01-04-2020 35. Inserted vide FINANCE (NO. 2) ACT, 2019 w.e.f. 01-04-2020 36. Inserted vide FINANCE (NO. 2) ACT, 2019 w.e.f. 01-04-2020 37. Inserted vide THE FINANCE ACT, 2021 dated 28-03-2021 w.e.f. 01-04-2021 38. Inserted vide Finance Act, 2022 w.e.f. 01-04-2023 39. Inserted vide Finance Act, 2022 w.e.f. 01-04-2023 40. Inserted vide Finance Act, 2022 w.e.f. 01-04-2023 41. Substituted vide THE FINANCE ACT, 2023 dated 31-03-2023 w.e.f. 01-04-2024 before it was read as, a deposit taking non-banking financial company or systemically important non-deposit taking non-banking financial company 42. Inserted vide THE FINANCE ACT, 2023 dated 31-03-2023 w.e.f. 01-04-2024 43. Inserted vide THE FINANCE ACT, 2023 dated 31-03-2023 w.e.f. 01-04-2024 44. Inserted vide THE FINANCE ACT, 2023 dated 31-03-2023 w.e.f. 01-04-2024 45. Substituted vide THE FINANCE ACT, 2023 dated 31-03-2023 w.e.f. 01-04-2024 before it was read as, (e) deposit taking non-banking financial company means a non-banking financial company which is accepting or holding public deposits and is registered with the Reserve Bank of India under the provisions of the Reserve Bank of India Act, 1934 (2 of 1934.); 46. Substituted vide THE FINANCE ACT, 2023 dated 31-03-2023 w.e.f. 01-04-2024 before it was read as, (g) systemically important non-deposit taking non-banking financial company means a non-banking financial company which is not accepting or holding public deposits and having total assets of not less than five hundred crore rupees as per the last audited balance sheet and is registered with the Reserve Bank of India under the provisions of the Reserve Bank of India Act, 1934. (2 of 1934.)