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Friday, November 25, 2011

SECTION 40A 2 OF INCOME TAX ACT

Where an assessee incurs any expenditure in respect of which payment has been made is to be made to any relative of the assessee or any specified person and such payment is found excessive or unreasonable having regard to the fair market value of the goods, service or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived or accruing to him there from, the assessing officer is required to disallow so much of expenditure as is found by excessive or unreasonable. 


The object of this provision as section 40A(2) of the income tax act is to check evasion of tax through excessive or unreasonable payments to relative or any other specified person.

   Type of assessee                                               Prescribed person covered under section 40A(2)
1 where the assessee is an individual            Any relative of the assessee

2 Where the assessee is the company   Any dirtector of the company or relative of director
3 Where the assessee is a firm                    Partner of firm or relative of partner

4 Where the assessee is an AOP            Member of AOP or relative of member
5 Where the assessee is an HUF           member of HUF or relative of member
6Where assessee is any person -          an individual having substantial interest in the business of the assessee or any relative of such individual
                                               a firm  having substantial interest in the business of the assessee or any partner of such company or relative of partner.

                                                an AOP having substantial interest in the business of the assessee or any member of such company or relative of member
.
                                               an HUF having substantial interest in the business of the assessee or any member of such company or relative of member
.
7 where the director of a company has substantial interest in the business of assessee -company in which director has substantial interest or such director or any relative of such director

8 where the partner of a firm has substantial interest in the business of assessee -Firm in which a patrtner has got substantial interest in the business of the assessee or any such partner or relative of partner 

Tags-section 40a 2,section 40a2 of income tax.section 40a 2 of income tax act,income tax section 40a 2









                       

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1 comments:

  1. kindly give me information about House rent tax deduction at the source

    ReplyDelete