Page 13 - Union Budget, 2022

Union Budget, 2022

Deduction on payment of interest is to be allowed only on actual payment
• It is proposed to insert an explanation in Sec 43B to specifically clarify that conversion of interest payable
on loan or borrowing into debenture or any other instrument, by which liability is deferred to a future

date, shall not be deemed to be actually paid and cannot be claimed as a deduction u/s 43B.
AY 2023-24 and subsequent AYs

• This would impact the borrowers who had opted for loan restructuring from banks/ NBFCs during
COVID-19 whereby the EMI, which includes the interest portion, was converted into additional

loan.
• However, where the interest being converted into equity, then the provisions of Sec 43B shall not be
applicable.

Rationalization of provision of TDS on sale of immovable property
• The TDS provision u/s 194IA at the rate of 1% on the sum paid as consideration on transfer of
immovable property, is now proposed to be amended to consider both stamp duty value and actual sale
consideration, where deduction shall be made on either of the amount, whichever is higher.
• Further, it is amended to include that no TDS deduction shall be made if both the sale consideration and
stamp duty value does not exceed ₹50 lakhs.

AY 2022-23 and subsequent AYs

The variation of 10%, vis-a-vis actual consideration and stamp duty value, which is allowed u/s 50C and 43CA
has not been proposed u/s 194IA.

Clarifications on allowability of expenditure relating to offence

• A new explanation is proposed to be inserted to clarify that expenses incurred in respect of following 3
items would be disallowed while computing income from business or profession:
1. Offence committed under any foreign law

2. Compounding of offence under any law (domestic or foreign)
3. Providing any benefit or perquisite to a person (whether or not such person carries on business or
profession), wherein, such acceptance is prohibited by the regulations governing the conduct of such
person.

AY 23-24 and subsequent AYs.

• As per the proposed amendment, even though the expenditure is in relation to business or incurred for
the purpose of business, if it falls within the above mentioned 3 categories, it shall be disallowed.

• While deciding on the allowability of the expenditure, the provisions of foreign law need to be additionally
considered.
• Further, it shall be noted that the expenditure prohibited not only by the law but any statutory
communications including the rules, regulations, decrees, guidelines, issued by statutory bodies by
whatever name called, which binds the concerned assessee, would additionally be disallowed.
• This amendment was necessitated due to various judicial rulings which allowed the expenses incurred by
pharmaceutical companies in providing benefits and perquisites to doctors, which was prohibited by the
Medical Council of India. However, this amendment has a far-reaching impact since it additionally
includes compliance to foreign laws as well.

Insights from NES

Sales of 1,687 listed manufacturing companies recorded steady and broad-based growth of 34% in Q2:FY 21-

22 as compared to (-)4.3% growth in Q2:FY 20-21, on an annual (y-o-y) basis.

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