Allowing deduction to non-life insurance business when TDS, not deducted earlier is paid later
Part B of Schedule XIV of the Act provides for computation of profits and gains from insurance business other than life insurance. Paragraph 4(1)(a) of Schedule XIV provides that while computing the profits and gains of such business, any expenditure, allowance, etc. which has been debited to profit and loss account but which is inadmissible under sections 28 to 54 shall be added back to the profits and gains.
2. Section 35(b)(i) and (ii) of the Act provides that any sum, interest, etc. payable on which tax is deductible at source but has not been deducted or deducted but not paid within the due date specified in section 263(1), then the amount as mentioned in the respective sections shall not be allowed as deduction. However, section 35(b)(i) and (ii) also provide that the amount disallowed shall be allowed in a tax year when the due tax was deducted and paid as per the provisions of the section.
3. Paragraph 4(2) of Schedule XIV provides that any amount payable under section 37 of the Act, which is added under paragraph 4(1)(a) shall be allowed as deduction in the tax year in which it has been actually paid. However, similar provision has not been provided for section 35(b)(i) and 35(b)(ii), wherein the amount added under paragraph 4(1)(a) shall be allowed as deduction in which tax has been deducted and paid as per the provisions of the said section.
4. Thus, to rationalize the same and provide for allowance of such amount as deduction in a subsequent tax year, it is proposed that a new sub-paragraph may be inserted in Paragraph 4.
5. It is proposed to amend schedule XIV of the Act.
6. This amendment will take effect from 1st April, 2026 and will, accordingly, apply in relation to the tax year 2026-27 and subsequent tax years.
[Clause 113]