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Section 40(a)(ia) TDS Disallowance Working Paper (Form 3CD Clause 21/26 Support)

A per-payment working paper for Section 40(a)(ia)/40(a)(i) disallowance testing — feeds Form 3CD Clause 21(b) — with a running total across every payment line you've determined a disallowance for.

Free · CORAA original — SA-aligned
Updated 28 Jul 2026
Feeds
Form 3CD Clause 21(b) / 26 / 34
Resident rate
30% of sum paid/payable — Sec 40(a)(ia)
Non-resident rate
100% of sum paid/payable — Sec 40(a)(i)
Cure
Second proviso — allowed in year of actual TDS deposit
Share this template
Your firm — letterhead
Appears at the top of the document as the audit firm letterhead.
Used as the letterhead block.
Engagement details
The client and period this document is for.
After applying cure provisions / partial-payment rules — this tool sums your figures, it does not compute the rate for you.
After applying cure provisions / partial-payment rules — this tool sums your figures, it does not compute the rate for you.
After applying cure provisions / partial-payment rules — this tool sums your figures, it does not compute the rate for you.
After applying cure provisions / partial-payment rules — this tool sums your figures, it does not compute the rate for you.
After applying cure provisions / partial-payment rules — this tool sums your figures, it does not compute the rate for you.
After applying cure provisions / partial-payment rules — this tool sums your figures, it does not compute the rate for you.
What’s inside

An excerpt from the template.

SECTION 40(a)(ia) / 40(a)(i) — TDS DEFAULT DISALLOWANCE WORKING PAPER

Entity: ___ · PAN: ___ · Previous year ended: ___ · Assessment Year: ___

Purpose: to test every expense payment liable to TDS for compliance with Chapter XVII-B, and to compute the resulting disallowance under Section 40(a)(ia) (resident payees) or Section 40(a)(i) (non-resident payees) where tax was not deducted, or deducted but not deposited within the prescribed time. This working paper feeds Form 3CD Clause 21(b) (amounts inadmissible under Section 40(a)) and cross-references Clause 34 (TDS/TCS compliance) and Clause 26 (Section 43B).

Payment-wise testing

↑ Excerpt only — the full template is what you download as Word
About this template

What you’re downloading, and when to use it.

This template follows the format published by the Institute of Chartered Accountants of India (ICAI) in the AASB Audit Working Paper Templates (June 2023), the authoritative reference for Indian statutory-audit documentation. Fill in your firm’s letterhead and the engagement details on the form above, click Download Word file, and you’ll get a fully formatted .docx ready to use.

Everything is generated in your browser and on a stateless API endpoint — no account, nothing stored on our servers. We’ll ask for a work email once before your first download so we can send you the file and the occasional relevant update; after that, downloads on this device are instant. Edit freely in Word, Google Docs or Pages before sending to your client.

Common questions

FAQs.

What is disallowed under Section 40(a)(ia)?
30% of any sum payable to a resident, on which tax is deductible at source under Chapter XVII-B, is disallowed as a business expense if the tax was not deducted, or was deducted but not deposited on or before the return-filing due date under Section 139(1). Section 40(a)(i) applies the same logic at a 100% disallowance rate for payments to non-residents/foreign companies.
Is the disallowance permanent, or can it be claimed later?
It is a timing disallowance, not permanent. The second proviso to Section 40(a)(ia) allows the expense as a deduction in the year the TDS is actually deducted and deposited, even if that is a later year — so the amount isn't lost, only deferred to the year of actual compliance.
Does the disallowance apply if the payee has already paid tax on that income?
A separate relief exists (linked to the first proviso to Section 201(1)) where the payer is not treated as an assessee-in-default for non-deduction if the resident payee has furnished their return of income, included the relevant sum in that return, and paid the tax due — but this doesn't automatically waive the Section 40(a)(ia) expense disallowance itself; the two provisions operate on different questions and should be tested separately, with a certificate/Form 26A obtained from the payee's CA to evidence the payee-side compliance where relied upon.
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