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 Direct Tax Code 2025 (Income-tax Act, 2025), effective 1st April 2026. Status: Retained.
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
What does Section 40 of the Income Tax Act 1961 deal with?
Section 40 (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 Direct Tax Code 2025?
Section 40 of the ITA 1961 maps to Section 42 of the Direct Tax Code 2025 (Income-tax Act, 2025), effective from 1st April 2026.
What is the status of Section 40 under the new tax code?
Section 40 is marked as "Retained" with status "Active". Impact: Critical - Enforces the entire TDS ecosystem.
What are the key changes to Section 40 under DTC 2025?
Equalisation Levy defaults now attract identical 100% disallowance similar to foreign TDS defaults.
Disclaimer: This page is for educational and reference purposes only. Section mappings are based on publicly available drafts and circulars. Always consult a qualified Chartered Accountant before filing or making compliance decisions under the Direct Tax Code 2025.
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