Start with the legal obligation
For FY 2025–26 and AY 2026–27, section 43B(g) of the Income-tax Act, 1961 applies to otherwise deductible sums payable to Indian Railways for the use of railway assets. Analyse the invoice and underlying agreement together. A supplier name, a rail reference or an expense label does not establish that the payment is for use of a railway asset. Identify the asset, period of use, legal payee and nature of the amount; review separately amounts for other services, deposits and capital transactions.
Read the applicable text: Income-tax Act, 1961: section 43B Notified ITR-6 Form 3CD CBDT Circular 7/2026.
Test both liability vintage and actual payment
A covered current-year liability otherwise deductible may remain allowable if actually paid by the company's applicable section 139(1) due date, with evidence of payment furnished as the proviso requires. For a previously disallowed balance, identify the amount paid within FY 2025–26 and check that it was not allowed earlier. The 21 November 2026 extension in Circular 7/2026 applies to the return filers in the specified class previously due on 31 October; classify the taxpayer before using it and distinguish the audit report deadline. A company required to furnish a report under section 92E has a separate statutory return deadline of 30 November 2026.
Reconcile deductions to the notified return
Use Form 3CD clause 26(A) to distinguish opening liabilities previously disallowed that were paid during the year from those not paid. Use clause 26(B) to distinguish current covered liabilities paid by the applicable section 139(1) deadline from those not paid by it. Part A–OI 11g feeds 11i and Schedule BP item 18 for current P&L debits disallowable under section 43B(g). Part A–OI 10g feeds 10i and Schedule BP item 31 for qualifying prior disallowances now allowable. The BP rows aggregate all relevant section 43B amounts. A payment on an invoice already deducted under the proviso does not create another deduction.
Make the file reviewable
Prepare an asset-use register by agreement and invoice. Record the covered amount, P&L or balance-sheet destination, original claim, payment reference, payee confirmation and residual disallowance. Match remittances to invoice lines and flag credit notes and disputes; a journal offset is not sufficient by itself to demonstrate payment. Keep any separate railway asset deposit or other charge under its own analysis.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Split one invoice
A ₹15 lakh invoice has a supported ₹9 lakh asset-use component and ₹6 lakh for separately established services outside clause (g). The clause (g) working starts at ₹9 lakh. The separate ₹6 lakh needs its own deduction analysis.
Illustrative example 2: Partial payment before cut-off
The company debits ₹12 lakh of covered current expense. It pays ₹5 lakh during FY 2025–26 and ₹4 lakh by the applicable return due date. ₹9 lakh qualifies on these facts; ₹3 lakh goes to 11g.
Illustrative example 3: Older amount paid within FY
Of ₹8 lakh previously disallowed, ₹5.5 lakh is paid in March 2026. ₹5.5 lakh qualifies for 10g; ₹2.5 lakh remains in the opening-cohort ledger.
Illustrative example 4: Remove a prior allowance
Of ₹7 lakh paid in May 2025, ₹4 lakh was already allowed under the proviso for FY 2024–25 and ₹3 lakh relates to an older invoice previously disallowed. On these assumptions the additional current claim is ₹3 lakh, not ₹7 lakh.
Illustrative example 5: Cut-off comparison
For a company covered by the circular, payment of otherwise deductible current expense on 18 November 2026 is three days before its 21 November deadline. Payment on 22 November is one day after; the latter amount cannot use that cut-off.
Illustrative example 6: Book-to-tax bridge
Book profit is ₹74 lakh; covered current disallowance is ₹6 lakh and allowable older disallowance is ₹2 lakh. The profit after those two adjustments is ₹78 lakh before other items.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm the assessment year and filing class | Return calendar and statutory classification |
| 2 | Find the legal payee | Agreement and supplier account |
| 3 | Identify the asset and use period | Asset-use terms and invoice line |
| 4 | Separate other charges from asset use | Invoice allocation and evidence |
| 5 | Check whether the cost is otherwise deductible | Accounting entry and tax position |
| 6 | Roll forward opening tax disallowances | Prior return, audit and orders |
| 7 | Match actual remittances to liabilities | Bank proof and settlement allocation |
| 8 | Apply the company's section 139(1) cut-off | Payment dates and applicable circular |
| 9 | Tie Form 3CD to OI and BP | Clause 26 and field reconciliation |
| 10 | Review later settlements for duplicate claims | Closing vintage ledger |
Sixteen practitioner FAQs
1. Is every railway invoice within clause (g)?
No. Confirm the payee and whether the consideration is for railway asset use.
2. Is a contractor's invoice automatically covered?
No. Trace the underlying obligation and legal payee before deciding.
3. Does payment make capital cost a revenue deduction?
Section 43B governs timing of an otherwise allowable deduction; determine character first.
4. Can the ledger label determine the treatment?
Use the agreement and invoice evidence behind the label.
5. How is an invoice with mixed services handled?
Reconcile the separately supported components and document the allocation.
6. Does a refundable deposit automatically qualify?
Test whether it discharges a deductible asset-use liability; a deposit entry alone does not show this.
7. What if payment evidence lacks an invoice reference?
Match it with bank, remittance and payee allocation records before using it.
8. Where is unpaid current P&L expense entered?
Use 11g for the qualifying clause (g) disallowance.
9. Where is a previous disallowance paid now entered?
Use 10g where the previous disallowance becomes allowable in the relevant year.
10. Is Form 3CD disclosure itself the tax adjustment?
Reconcile the audited facts to the return computation and use the corresponding fields once.
11. Does the circular apply to every company?
No. Check whether it falls in the class expressly covered.
12. Can the actual return upload date extend the cut-off?
No. Apply the applicable section 139(1) due date.
13. What if a previously disallowed balance is paid after 31 March 2026?
That is not payment within FY 2025–26; review the relevant payment year.
14. What if an opening book balance was previously allowed?
Remove it from the tax-disallowed carry-forward and avoid a repeat claim.
15. Should a journal credit be treated as cash settlement?
Obtain evidence of actual discharge; do not infer it from bookkeeping alone.
16. Can the final BP amount be compared directly with the railway ledger?
First isolate its share, because the BP rows also include other section 43B classes.
Official sources
Income-tax Act, 1961: section 43B Notified ITR-6 Form 3CD CBDT Circular 7/2026