InvestorQ : What will happen to the tax liability of companies as many payments have been deferred by the companies?
Anusha Savla made post

What will happen to the tax liability of companies as many payments have been deferred by the companies?

Answer
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simran Kaur answered.
4 months ago


As per the provisions of the Income-tax Act, if a company defers an employee’s salary or a vendor’s payment, the company shall be still liable for tax payments as such deferment is a promise of income in the future. Therefore, the companies shall have to provide for tax liability on payments that are deferred for the time being due to lockdown. Deferring payment in any sense would not mean that the tac could be deferred too. However, if the deferred salaries or payments are never paid or postponed beyond March 21, the recipient would be paying tax on payments that were never received.

There are chances that companies might shift the burden to employees and vendors, this means they will have to pay taxes even if the payments/salaries would not be received by them. The companies have also extended payment cycles for vendors and salary payments to employees are also being delayed.