Generally in any business if pay salary to employee, and assessing officer disallowed those salaries by assuming tax evasion, does such disallowed expenses led to penalty as well ?
Certain business expenses are disallowed as tax deductions, including personal expenses, fines, penalties, and excessive entertainment costs. Understanding these restrictions helps ensure compliance and avoid legal issues. Proper financial planning and consulting a tax expert can help businesses maximize allowable deductions while staying within legal and regulatory limits.
1 Like
Hello @dipak_Motivaras ,
If you are paying salary to the employees of your business then it is allowed as an expense. Make sure you comply with the applicable TDS compliance and make digital payments if the salary is above ₹10,000.
In case you receive any query on this salary expense, you can submit the relevant documents as a response to the ITD. If these expenses are proven incorrect then you will have to pay tax and interest penalty on the same.
1 Like
Business expenses can be disallowed by tax authorities if they are deemed non-essential, personal, or not properly documented. Common disallowed expenses include personal expenses, fines and penalties, excessive entertainment costs, and undocumented cash payments. To avoid disallowance, businesses should maintain clear records and ensure expenses are necessary and directly related to operations. Proper compliance with tax regulations is key to avoiding disputes.
1 Like