TaxTMI 
TaxTMI 
TaxTMI 
Comparison of Section 35 "Amounts not deductible in certain circumstances" between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)
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....fects cross-border payments subject to TDS or equalisation levy. Effective date or enactment date: Not stated in the document. Background & Scope Statutory hooks: Clause 35 operates "Irrespective of any other provision of Chapter IV-D" and repeatedly references Chapter XIX-B (TDS provisions), section 263(1) (due date for payment of TDS), section 159/160 (relief for tax paid in another country), Chapter VIII of the Finance Act, 2016 (equalisation levy), and the Societies Registration Act, 1860. Coverage: the clause enumerates categories of payments/disbursements that are not deductible for computing business/professional income. Definitions or explanations supplied in the text include meanings of "book profit" and "working partner" and det....
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....rom the fund that are taxable as "Salaries". * Payments chargeable under "Salaries": payments chargeable under "Salaries" and payable outside India or to a non-resident where TDS under Chapter XIX-B is not deducted/paid are disallowed. * Equalisation levy on specified services: any consideration paid or payable to a non-resident for a specified service on which equalisation levy is deductible under Chapter VIII of the Finance Act, 2016, and which has not been deducted/paid up to the due date in section 263(1), is disallowed; deduction of such consideration is allowed in any subsequent tax year in which such levy has been paid. * State Government appropriations: amounts levied exclusively on, or appropriated from, a State Government un....
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....sonable partner payments and interest to deny business deductions. Exceptions/Provisos The clause contains operational provisos: * For TDS/equalisation levy shortfalls, the disallowance is limited to 30% of the sum (for resident payments) and similar treatment for non-resident/foreign company payments; where the tax/levy is paid in a later year, deduction is allowed in that later year. * Where the payer fails to deduct but is not deemed an assessee in default u/s 398(2), the payer is deemed to have deducted and paid tax on the date the payee files the return as referred to in section 398(2) - an explicit deeming mechanism to avoid permanent disallowance in certain circumstances. * Partnership remuneration and interest are allowed on....
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....he document: any cross-references to Rules, Forms or procedure to report delayed payment of TDS/equalisation levy beyond the general references. Differences between Section 35 of the Income-tax Act, 2025 - (As Passed) and Clause 35 of the Income Tax Bill, 2025 - (Old Version) * Placement and numbering of sub-clauses: The As Passed version reorders and renumbers certain sub-clauses (for example, provisions dealing with payments chargeable under "Salaries", State Government undertakings and partnership/AoP rules appear under different clause letters). * Practical impact: purely structural but may affect ease of cross-referencing; substantively most core rules remain with modest drafting changes. * Equalisation levy ....
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.... impact: substantive effect appears similar (disallow 30% until tax is actually paid/deducted), but the As Passed drafting emphasises timing of payment versus deduction; possible interpretive emphasis on date of payment of tax as the trigger for allowance of the 30% element. * Provident/other fund rule: Both versions disallow payments to employee funds unless effective arrangements exist to secure TDS under Chapter XIX-B from payments made from the fund that are taxable as "Salaries". Drafting varies slightly but content is aligned. * Practical impact: continuity of requirement; employers must ensure withholding mechanisms in place for fund disbursements or face disallowance. * Partnership remuneration and interest rules: Both contain....
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....S on payments out of employee funds to secure deductibility. * Record-keeping/evidence: Documentation demonstrating deduction and deposit dates, partnership deeds (and their effective periods), records of representative capacity arrangements, and evidence of payments/levy compliance will be critical to substantiate deductions in later years. Key Takeaways * Clause 35 denies deductions tied to failure to comply with withholding and equalisation levy obligations, but allows restoration of deduction in the year the obligation is satisfied. * A 30% disallowance rule applies to certain resident payments subject to TDS until tax is actually paid/deducted. * Distinct treatment is applied to payments outside India or to non-residents/forei....