Interest on Advance Tax

[JAIPRAKASH RUIA]

Dear Sir,

Whether Interest paid on instalment of advance tax, and self- assessment tax is a finance cost.

Is the same allowed as business expenditure ? What are relevant section and rules ?

[DR.MARIAPPAN GOVINDARAJAN]

In my view it will not be allowed as business expenditure.

[JAIPRAKASH RUIA]

But sir, saction 40 (a) (ii) talk only about rates or taxes and as per definition of, Interest u/s 234 A , BC not part of that.

[Ganeshan Kalyani]

It is not a business expenditure.

AI Summary

Interest on late tax payments treated as a finance cost and not deductible as a business expense.
Interest charged on instalments of advance tax and on self-assessment tax is treated as a finance cost and not allowable as a business expenditure; section 40(a)(ii) deals with rates and taxes and does not include penal or default interest on delayed tax payments, which is governed by provisions imposing interest for late payment and is excluded from ordinary deductible tax heads.