Section 40 → Section 42
Amounts not deductible
Quick Answer
Section 40 of the Income Tax Act, 1961 (Amounts not deductible) corresponds to Section 42 of the Income-tax Act, 2025, effective 1st April 2026. Status: Retained.
What changed for Section 40
The starting point is Section 40 of the Income Tax Act, 1961 — amounts not deductible. Disallows expenses on which TDS was not deducted (30% disallowance for residents, 100% for non-residents), and disallows income tax/wealth tax payments.
Under the Income-tax Act, 2025 (effective 1st April 2026), Section 40 is retained and renumbered as Section 42 of the Income-tax Act, 2025. Retained. Disallowance algorithms automatically run on the filing portal based on TDS returns mismatch.
The transition impact on Section 40 is assessed as Critical. Enforces the entire TDS ecosystem.
Sec 40
Provision Summary
Disallows expenses on which TDS was not deducted (30% disallowance for residents, 100% for non-residents), and disallows income tax/wealth tax payments.
Sec 42
Provision Summary
Retained. Disallowance algorithms automatically run on the filing portal based on TDS returns mismatch.
Key Changes & Highlights
- Equalisation Levy defaults now attract identical 100% disallowance similar to foreign TDS defaults.
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Frequently Asked Questions
Which subject does Section 40 of the 1961 Act cover?
Section 40 of the Income Tax Act, 1961 covers amounts not deductible. Disallows expenses on which TDS was not deducted (30% disallowance for residents, 100% for non-residents), and disallows income tax/wealth tax payments.
What is the new section number for Section 40 under the Income-tax Act, 2025?
Section 40 of the Income Tax Act, 1961 maps to Section 42 of the Income-tax Act, 2025, effective 1st April 2026 (status: Retained). Retained. Disallowance algorithms automatically run on the filing portal based on TDS returns mismatch.
How does the Income-tax Act, 2025 affect Section 40 in practice?
The transition impact for Section 40 is rated Critical. Enforces the entire TDS ecosystem.
What is new about Section 40 under the Income-tax Act, 2025?
Equalisation Levy defaults now attract identical 100% disallowance similar to foreign TDS defaults. These points are specific to Section 40 (Amounts not deductible).
Disclaimer: This mapping of Section 40 (Amounts not deductible) to Section 42 of the Income-tax Act, 2025 is for educational and reference purposes only, based on publicly available drafts and circulars. As Section 40 is currently marked Retained, always confirm its treatment with a qualified Chartered Accountant before filing or making compliance decisions.
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