Certain deductions to be only on actual payment.

Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of—

3[(a) 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]

1. (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, 4[or] 4[(c) any sum referred to in clause (ii) of sub-section (1) of section 36,] 5[or] 5[(d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution 6[or a State financial corporation or a State industrial investment corporation], in accordance with the terms and conditions of the agreement 7[governing such loan or borrowing; or] 8[(e) any sum payable by the assessee as interest on any 9[loan or advances] from a scheduled bank 10[or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank] in accordance with the terms and conditions of the agreement governing 11[such loan or advances], 12[or] 12[(f) any sum payable by the assessee as an employer in lieu of any leave at the credit of his 13[employee, or]] 14[(g) any sum payable by the assessee to the Indian Railways for the use of railway assets,] shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him: 1[Provided that nothing contained in this section shall apply in relation to any sum 2*** which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in whichthe liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return.

¹ Ins. by Act 13 of 2018, s. 13 (w.r.e.f. 1-4-2017).

² Ins. by Act 11 of 1983, s. 18 (we.f. 1-4-1984).

³ Subs. by Act 26 of 1988, s. 12, for clause (a) (w.e.f. 1-4-1989).

⁴ Ins. by Act 4 of 1988, s. 15 (w.e.f. 1-4-1989).

⁵ Ins. by Act 26 of 1988, s. 12 (w.e.f. 1-4-1989).

⁶ Ins. by Act 12 of 1990, s. 13 (w.e.f. 1-4-1991).

⁷ Subs. by Act 33 of 1996, s. 18, for “governing such loan or borrowing” (w.e.f. 1-4-1997).

⁸ Ins. by s. 18, ibid. (w.e.f. 1-4-1997).

⁹ Subs. by Act 32 of 2003, s. 21, for “term loan” (w.e.f. 1-4-2004).

¹⁰ Ins. by Act 7 of 2017, s. 17 (w.e.f. 1-4-2018).

¹¹ Subs. by Act 32 of 2003, s. 21, for “such loan” (w.e.f. 1-4-2004).

¹² Ins. by Act 14 of 2001, s. 27 (w.e.f. 1-4-2002).

¹³ Subs. by Act 28 of 2016, s. 23, for “employee” ( w.e.f. 1-4-2017).

¹⁴ Ins. by s. 23, ibid. (w.e.f. 1-4-2017).

3* ]

Explanation 4[1].—For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (a) or clause (b) 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 day of April, 1983, 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:]

5[Explanation 2.—For the purposes of clause (a), as in force at all material times, “any sum payable” means a sum for which the assessee incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law.]

6[Explanation7[3].—For the removal of doubts it is hereby declared that where a deduction in respect of any sum referred to in clause (c)8[or clause (d)] 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 day of April, 1988, 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.]

9[Explanation 3A.—For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (e) 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 day of April, 1996, 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.]

10[Explanation 3B.—For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (f) 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 day of April, 2001, 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.]

¹ Ins. by Act 11 of 1987, s. 10 (w.e.f. 1-4-1988).

⁵ Ins. by Act 13 of 1989, s. 9 (w.e.f. 1-4-1984).

⁶ Ins. by Act 4 of 1988, s. 15 (w.e.f 1-4-1989).

⁸ Ins. by Act 26 of 1988, s. 12 (w.e.f. 1-4-1989).

⁹ Ins. by Act 33 of 1996, s. 18 (w.e.f. 1-4-1997).

¹⁰ Ins. by Act 14 of 2001, s. 27 (w.e.f. 1-4-2002).

2. The words “referred to in clause (a) or clauses (c) or clause (d) or clause (f)” omitted by Act 32 of 2003, s. 21 (w.e.f. 1-4-2004). 3. The second proviso omitted by s. 21, ibid. (w.e.f. 1-4-2004). 4. The Explanation numbered as Explanation 1 thereof by Act 4 of 1988, s. 15 (w.e.f. 1-4-1989). 7. Explanation 2 renumbered as Explanation 3 thereof by Act 13 of 1989, s. 9 (w.e.f. 1-4-1984).

1[Explanation 3C.—For the removal of doubts, it is hereby declared that a deduction of any sum, being interest payable under clause (d) 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.]

2[Explanation 3D.—For the removal of doubts, it is hereby declared that a deduction of any sum, being interest payable under 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 advance shall not be deemed to have been actually paid.]

3[Explanation 4.—For the purposes of this section,—

1. (a) “public financial institutions” shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956); 4[(aa) “scheduled bank” shall have the meaning assigned to it in the Explanation to clause (iii) of sub-section (5) of section 11;]
2. (b) “State financial corporation” means a financial corporation established under section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951);
3. (c) “State industrial investment corporation” means a Government company within the meaning of section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providing longterm finance for industrial projects and 5[eligible for deduction under clause (viii) of sub-section (1) ofsection 36].] 6[(d) “co-operative bank”, primary agricultural credit society” and “primary co-operative agricultural and rural development bank” shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P.]