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CS Executive · Tax Laws and Practice · Computation of Total Income and Tax Liability of various Entities

Under section 37 of the Income-tax Act, 2025, which of the following sums payable is allowed as a deduction only on actual payment, irrespective of the method of accounting regularly followed?

Cess or fee levied under any law in force. Section 37(2)(a) lists such levies among sums deductible only in the tax year they are actually paid, regardless of the accounting method, whereas salary, rent and audit fee are not in that list.

  1. ASalary payable to employees for March
  2. BRent payable to a landlord for the year
  3. CCess or fee levied under any law in forceCorrect
  4. DAudit fee payable to the statutory auditor

Explanation

Section 37(2)(a) lists tax, duty, cess, surcharge or fee levied under any law in force among sums allowed only on actual payment. Salary, rent and audit fee are not listed in sub-section (2), so they follow the regular method of accounting subject to other provisions.

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