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Year-end accruals include statutory dues, bonus and MSME payables that may not be deductible until paid.
List each unpaid item by 43B head on 31 March, then check whether it was paid by the return due date or, for MSME dues, within the MSMED Act period.
A year-end schedule with head, amount, due date, actual bank payment date and whether relief applies.
A clear add-back figure for the tax computation, supported by bank payment dates.
Section 43B of the Income-tax Act 1961 lists business expenses that you can deduct only when you actually pay them, whatever your accrual books show. The list covers statutory taxes and duties, the employer’s PF and similar contributions, bonus, leave encashment, interest on bank and financial-institution loans and, from AY 2024-25, payments to micro and small suppliers that are made late.
The Income-tax Act 2025, in force from 1 April 2026, carries a similar rule under a new section number. This article uses the 1961 Act clauses, which govern FY 2025-26.
Which expenses does Section 43B cover?
| Common 43B head | When the deduction is allowed | What to check on 31 March |
|---|---|---|
| Taxes and duties, such as GST payable | Year of accrual if paid by the return due date | Challan date for March GST |
| Employer contribution to PF, ESI, gratuity | Year of accrual if paid by the return due date | Employer share challans |
| Bonus and commission to employees | Year of accrual if paid by the return due date | Bonus payout date |
| Interest on loans from banks and financial institutions | Year of accrual if actually paid by the return due date | Interest debit, not just conversion into a new loan |
| Leave encashment | Year of actual payment | Amounts paid to leavers |
| Dues to micro and small suppliers, Section 43B(h) | Year of accrual only if paid within the MSMED Act period (15 days, or up to 45 days with an agreement) | Supplier tier, acceptance date and bank payment date |
Does paying after 31 March still save the deduction?
For most heads, yes. A proviso to Section 43B allows the deduction in the year of accrual if the amount is paid on or before the due date for filing the income tax return under Section 139(1). The MSME clause, Section 43B(h), is the important exception: the proviso does not apply to it. If an MSME payable is paid late, it is deductible only in the year it is paid, even if that is a few days after 31 March.
Leave encashment is allowed only in the year of payment. Treat the exact relief for each clause as something to confirm against the statute or with your CA.
How is this different from just paying late?
Late payment usually brings its own cost, such as interest on late GST or MSMED Act interest at three times the RBI bank rate. Section 43B is a separate timing rule: it moves the deduction to the year you pay. For most heads you get the deduction later, not never. The permanent loss most people mix up with 43B is on the employee’s share of PF and ESI, which is disallowed under Section 36(1)(va) if deposited after the due date, and cannot be claimed later.
Worked example: ₹8,00,000 of unpaid items on 31 March
A company has these unpaid items on 31 March 2026. Its return due date is 31 October 2026.
| Item | Amount | Paid on | Result for FY 2025-26 |
|---|---|---|---|
| GST payable for March | ₹2,50,000 | 20 April | Allowed (paid before return due date) |
| Employer PF contribution for March | ₹1,00,000 | 15 April | Allowed |
| Bonus | ₹1,50,000 | 25 September | Allowed |
| Bank-loan interest | ₹50,000 | 5 April | Allowed |
| Payable to a small supplier, due 15 March | ₹2,50,000 | 10 April | Added back |
Total unpaid: ₹2,50,000 + ₹1,00,000 + ₹1,50,000 + ₹50,000 + ₹2,50,000 = ₹8,00,000. Only the ₹2,50,000 MSME payable is added back. At an effective company rate of 25.17%, the extra tax for the year is ₹2,50,000 × 25.17% = ₹62,925. The amount is deductible in FY 2026-27, the year it was paid.