Method of Accounting Types, Section 43B Deduction on Actual payment. Section 43CA

Method of Accounting

Computation of Income and Expenses under the Profit and Gain of Business or Profession comes under Method of Accounting.

There are two types of Method of accounting.

  1. Cash system of accounting.
  2. Mercantile system of accounting

What ever system of accounting office adopted should be adopted regularly and any changes shall be allowed only after the permission of assessing officer.

Cash System of Accounting :- In case of  Cash system of Accounting accounts will be maintained on cash basis.

Mercantile Basis:- In case of Mercantile basis assessee  will  maintained books of accounts all the expenditure are allowed on due basis. However the expenditure listed under the section 43B are allowed only on actual payment basis.


  1. Any amount payable by the assessee to the authority like  Municipal taxes, Professional Tax, Composition Tax etc.
  2. Any contribution toward provident fund, Superannuation Fund or Gratuity Fund, Employees State Insurance (ESI) or any other fund by the Employers
  3. Bonus Commission or Leave salary to the employee.
  4. Interest on any loan or borrowing from any Public Financial Institution or a State Financial Corporation or a State Industrial Investment Corporation or schedule bank.
  5. Any sum payable by the assessee to the Indian Railways for the use of railway assets.

Full value of consideration for transfer of assets other than capital assets Section 43CA

Any land and building sold which was held as stock-in-trade and it was sold at a value less than the stamp duty value, in such cases stamp duty value will be considered as sale value. However any agreement of selling property on earlier date and any advance taken through cheque or account payee draft or through electronic system, in that case stamp duty value on the date of agreement shall be taken into consideration.




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