Amendment of section 43B.
13. In section 43B of the Income-tax Act, with effect from the 1st day of April, 2020,––
(i) after clause (d), the following clause shall be inserted, namely:––
“(da) any sum payable by the assessee as interest on any loan or borrowing from a deposit taking non-banking financial company or systemically important non-deposit taking non-banking financial company, in accordance with the terms and conditions of the agreement governing such loan or borrowing, or”;
(ii) after Explanation 3A, the following Explanation shall be inserted, namely:––
“Explanation 3AA.-For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (da) is allowed in computing the income referred to in section 28, of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 2019, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.”;
(iii) after Explanation 3C, the following Explanation shall be inserted, namely:––
“Explanation 3CA.-For the removal of doubts, it is hereby declared that a deduction of any sum, being interest payable under clause (da), shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or borrowing shall not be deemed to have been actually paid.”;
(iv) in Explanation 4, after clause (d), the following clauses shall be inserted, namely:––
‘(e) “deposit taking non-banking financial company” means a non-banking financial company which is accepting or holding public deposits and is registered with the Reserve Bank of India under the provisions of the Reserve Bank of India Act, 1934(2 of 1934);
(f) “non-banking financial company” shall have the meaning assigned to it in clause (f) of section 45-I of the Reserve Bank of India Act, 1934(2 of 1934);
(g) “systemically important non-deposit taking non-banking financial company” means a non-banking financial company which is not accepting or holding public deposits and having total assets of not less than five hundred crore rupees as per the last audited balance sheet and is registered with the Reserve Bank of India under the provisions of the Reserve Bank of India Act, 1934(2 of 1934).’.
Notes on Clauses:
Clause 13 of the Bill seeks to amend section 43B of the Incometax Act relating to certain deductions to be only on actual payment.
Clause (d) of the said section provides that in case of any loan or borrowing from any public financial institution or a State financial corporation or a State industrial investment corporation, deduction of any sum payable by the assessee as interest on such borrowing, in accordance with the terms and conditions of the agreement governing such loan or borrowing, shall be allowed only in computing the income of such borrower in the previous year in which such sum is actually paid by him.
It is proposed to amend the said section by inserting clause (da) to provide that in case of any loan or borrowing from any systemically important non-deposit taking non-banking financial company or a deposit taking non-banking financial company, deduction of any sum payable by the assessee as interest on such borrowing, in accordance with the terms and conditions of the agreement governing such loan or borrowing, shall be allowed in computing the income of such borrower only in the previous year in which such sum is actually paid by him.
It is further proposed to insert Explanation 3AA in the said section to provide that where a deduction in respect of any sum referred to in clause (da) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st April, 2019, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.
It is also proposed to insert Explanation 3CA in the said section to provide that a deduction of any sum, being interest payable under clause (da) of this section, shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or borrowing shall not be deemed to have been actually paid.
It is also proposed to define the expressions “deposit taking non-banking financial company”, “non-banking financial company” and “systemically important non-deposit taking non-banking financial company” in the said Explanation 4 to the said section.
These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020- 2021 and subsequent assessment years.
