Section 40(a)(ia)- Non-compliance of Provisions of TDS where payment is made to Resident:
If any interest, royalty, fees for technical services or other sum paid or credited to Resident and if
- TDS has not been deducted in previous year (Or)
- TDS deducted but not deposited to Govt up to due date of return filing
then 30% of such sum shall not be allowed as deduction in current Previous Year.
Example-1
Onlinesolves Ltd paid of Rs 5,00,000 as liability for remuneration to Santosh, a film artist and a resident. Tax was not deducted at the time of payment. what is the Dis-allowance of for the amount of Remuneration ?
Answer:
As per section 40(a) any sum payable to a resident shall not be allowed as deduction, if tax has not been deducted at source or after deduction, has not been paid on or before the due date specified under section 139(1).
So, here the payment is made to Santosh who is resident without tax deduction and amount of Rs:1,50,000 (5,00,000 x 30% ) is not allowed as deduction.
Example-2
Onlinesolves Ltd paid of Rs 5,00,000 as on 15-08-2021. liability for Remuneration to Santosh, a film artist and a resident. Tax was deducted at the time of payment but it was deposited to Govt. on 15-11-2022. what is the Dis-allowance of for the amount of Remuneration ?
Answer:
As per section 40(a) any sum payable to a resident shall not be allowed as deduction, if tax has not been deducted at source or after deduction, has not been paid on or before the due date specified under section 139(1).
So, here payment is made to resident and tax deducted as per section 195. But it was not deposited within time limit i.e within due of return filing under section 139(1). So, the total amount of Rs: 1,50,000( 30% x 5,00,000) is dis-allowed the deduction to onlinesolves.ltd.
Important Point Need to Keep in Mind
If TDS deducted in subsequent year or deducted in Previous Year but paid to Govt. after due date of return filing then such sum (30% ) shall be allowed as a deduction in the Previous Year in which such TDS has been paid to Govt.
Exception to Section. 40(a)(ia):
If any amount paid /credited to payee without deduction of TDS but such payee
- Furnishes his Return of Income
- Takes into account such amount in total income.
- He has paid the tax due on such income
- Payer furnishes a certificate in FORM 26A from Chartered Accountant to this effect then it shall be deemed that the payer has deducted TDS & paid to Govt on date of furnishing of return by payee & deduction of such expenditure shall be allowed accordingly (30% ) disallowed in current year and will be allow in the year in which payee file his Rerturn of Income.
However payer has to pay interest u/s 201(1A) @ 1% pm or part of the month on the amount of TDS not deducted from the date on which the TDS was so deductible till the date on which payee furnish his ROI.
