Withholding tax deductibility restricted where tax is not deducted at source, with later deduction allowed upon subsequent payment.

Amounts subject to withholding under Chapter XI are disallowed as deductions if tax was not deducted during the financial year or, if deducted, was not paid in that year or by the prescribed time; an exception allows deduction where tax is deducted in the last quarter and paid before the return filing due date. If the required withholding tax is actually paid subsequently, the related expenditure becomes deductible in a later year, provided payment occurs within two financial years immediately succeeding the year when withholding was required.

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