Section 43B is an over-ruling section and anything contained in other provisions of the Income Tax Act should not be applicable to the payments mentioned under this section.
Section 43B states that certain payments should be allowed to be claimed as an expense only in the year in which they have been paid and not in the year in which the liability to pay such sum was incurred. Thus, for the following expenses, accrual concept of accounting should not be followed and only cash basis of accounting should be followed.
However, the provisions of Section 43B shall not apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing his Income Tax Return under Section 139(1) in respect of the previous year in which liability to pay such sum was incurred by the assessee and the evidence of such payment is furnished along with the income tax return
Payments for which Section 43B is applicable
a. Payment of Taxes
Any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called under any law for the time being in force, or
b. Employer Contribution for benefit of Employee
Any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity find or any other fund for the welfare of the employees
c. Bonus/ Commission
Any Bonus or Commission payable to the Employees
d. Interest on any Loan or Borrowing
Any sum payable by the assessee as Interest on any Loan or borrowing from any public financial institution or a State Financial Corporation or a State Industrial Investment Corporation, in accordance with the terms and conditions of the agreement governing such loans of borrowings, or
e. Interest on any Loan or Advance
Any sum payable by the assessee as Interest on any Loan or Advance from a scheduled bank in accordance with the terms and conditions of the agreement governing such loan or advance
f. Provision for Leave Encashment
Any sum payable by the assessee as an employer in lieu of any leave to the credit of his employee
g. Payment made to Railways
With a view to promote prompt payment to Railways, Budget 2016 has amended Section 43B and from Financial Year 2016-17 onwards, the payments made to Railways would be allowed to be claimed as an expense on Payment basis.
Other Relevant Points
For the removal of any doubts, it has been clarified that a deduction of any sum being interest payable under Clause (d) or Clause (e) 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.