CBDT CIRCULAR NO.2/2018 [F.NO.370142/15/2017-TPL], DATED 15-2-2018
34. Disallowance for non-deduction of tax from payment to resident.
34.1 Section 58 of the Income-tax Act specifies the amounts which are not deductible in computing the income under the head “Income from other sources” which include certain disallowances made in computation of income under the head “Profits and gains of business or profession”. These disallowances include disallowances such as disallowance of cash expenditure, disallowance for non-deduction of tax from payment to non-resident, etc.
34.2 For computing income under the head “Profits and gains of business or profession”, a disallowance is made for non-deduction of tax from payment to resident also. With a view to improve compliance of provisions relating to tax deduction at source (TDS), section 58 of the Income-tax Act has been amended so as to provide that the provisions of section 40(a)(ia) of the Income-tax Act shall, so far as they may be, apply in computing income chargeable under the head “Income from other sources” as they apply in computing income chargeable under the head “Profit and gains of business or Profession”.
34.3 Applicability: This amendment takes effect from 1st April, 2018 and will, accordingly, apply from assessment year 2018-19 and subsequent years.