Clause 30B explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Clause 30B reports the section 94B interest limitation: where interest or similar expenditure on debt from a non-resident associated enterprise exceeds Rs 1 crore, the excess over 30% of EBITDA is disallowed and carried forward for eight assessment years.
From the ICAI Guidance Note on Tax Audit (Revised 2026), the Eleventh and, by ICAI's own statement, concluding edition under the Income-tax Act, 1961. For tax years under the Income-tax Act, 2025 the corresponding limitation must be identified afresh, and the particulars move to Form No. 26 under rule 47 of the Income-tax Rules, 2026.
What clause 30B asks
Sub-clause (a) of clause 30B asks whether the assessee has incurred expenditure by way of interest or of similar nature exceeding one crore rupees as referred to in section 94B(1). If yes, sub-clause (b) requires:
- the amount of interest or similar expenditure incurred;
- EBITDA during the previous year;
- the amount of the interest at (i) which exceeds 30% of EBITDA at (ii);
- details of interest expenditure brought forward under section 94B(4), by assessment year; and
- details of interest expenditure carried forward under section 94B(4), by assessment year.
The rule behind clause 30B
Paragraph 53.1: where an Indian company or a permanent establishment of a foreign company in India incurs any expenditure by way of interest or of similar nature exceeding Rs 1 crore, deductible in computing income under profits and gains of business or profession, in respect of a debt issued by a non-resident associated enterprise, such interest to the extent of the excess interest shall not be deductible.
And the extension: if the debt is issued by a lender who is not associated, but an associated enterprise provides either an implicit or explicit guarantee to that lender, or deposits a corresponding and matching amount of funds with the lender, such debt is also regarded as having been issued by an associated enterprise.
Paragraph 53.2: the excess interest is the lower of:
- total interest paid or payable in excess of 30% of EBITDA of the borrower in the previous year; or
- interest paid or payable to associated enterprises for that previous year.
The disallowed excess can be carried forward for eight assessment years following the year of disallowance, to be allowed as a deduction against profits and gains of any business in subsequent years, to the extent of the maximum allowable interest expenditure under the section.
What "debt" and "similar nature" mean
Paragraph 53.3: "debt" is widely defined as any loan, financial instrument, finance lease, financial derivative, or any arrangement that gives rise to interest, discounts or other finance charges deductible in computing business income.
Paragraph 53.7: "expenditure of similar nature" should be read in the context of that definition, and would include discount or premium on securities, the finance cost component of lease rentals in respect of finance leases, guarantee commission, commitment fees or any other finance charges.
Paragraph 53.7: in computing the Rs 1 crore limit, only interest and similar expenditure deductible in computing business income should be considered — not interest deductible under another head, and not interest otherwise not deductible. So interest disallowed under section 14A, under the proviso to section 36(1)(iii), under section 40A(i) or 40A(2), or on transfer pricing grounds under section 92, should not be counted. Those amounts have already failed a different test, and counting them again would inflate the clause 30B population.
Who is outside section 94B
Paragraph 53.4 lists the exclusions:
| Excluded | From |
|---|---|
| An Indian company or PE of a foreign company engaged in the business of banking or insurance | Section 94B(3) |
| A notified class of non-banking financial companies, being an NBFC under section 45-I(f) of the RBI Act, 1934 | FY 2023-24, i.e. A.Y. 2024-25 onwards |
| A finance company located in an IFSC | A.Y. 2025-26 |
| Interest on a debt issued by a lender which is a permanent establishment in India of a non-resident engaged in the business of banking | Section 94B(1A) |
Paragraph 53.5: for these assessees the provisions do not apply, details under this clause are not required to be provided, and the answer to question (a) may be given as "No".
Paragraph 53.6 adds the other route to "No": the section applies only where interest or similar expenditure paid or payable to non-resident associated enterprises — or in respect of a debt where an associated enterprise, resident or non-resident, gave an implicit or explicit guarantee or a matching deposit — exceeds Rs 1 crore during the year. Below that, the section is not applicable and the answer should be "No".
Which interest goes in item (i) of clause 30B
Paragraph 53.8 works through an interpretive point the form leaves open. Because clause (a) asks specifically about section 94B(1), the subsequent sub-clauses seem to be consequential and flowing from clause (a). Section 94B(1) confines itself to interest paid to a non-resident associated enterprise, and section 94B(2) can be regarded as controlled by sub-section (1) since it operates "for the purposes of sub-section (1)". So the computation of excess interest should be within the boundaries of the interest referred to in section 94B(1) — that is, non-resident associated enterprise interest.
The Guidance Note supports this by noting that paragraph 46.3 of CBDT Circular No. 2 of 2018, the Explanatory Notes to the Finance Act, 2017 dated 15 February 2018, uses language similar to the format of reporting prescribed in clause 30B of Form No. 3CD.
Accordingly, item (i) reports the expenditure by way of interest or of similar nature paid to the non-resident associated enterprise, or to the lender to whom the associated enterprise gave an implicit or explicit guarantee or a matching deposit, out of the total interest and similar expenditure claimed as deduction. And a definitional reminder: "paid" in terms of section 43(2) means actually paid or incurred according to the method of accounting employed.
EBITDA — which figure
Paragraph 53.9: Collins English Dictionary defines EBITDA as "the amount of profit that a person or company receives before interest, taxes, depreciation, and amortisation have been deducted", and section 94B(2) uses similar terminology. The instruction that matters:
"While computing the EBITDA, the figures as per the final audited stand-alone accounts of the company should be considered, and not the figures as adjusted for the income tax computation after various allowances and disallowances."
Paragraph 53.10 covers the negative case: where EBITDA is negative, the entire interest and other similar expenditure at item (i) is reported at item (iii) without any adjustment for the negative figure — the negative figure being taken as nil.
Brought forward and carried forward
- Item (iv) — paragraph 53.11: the brought forward excess interest disallowed in earlier years, not yet allowed, and available for deduction during the year under audit, computed without considering the limitation during the year under audit. The auditor should verify the computation of income as per the returns filed for the relevant earlier years. The maximum carry-forward is eight assessment years immediately succeeding the assessment year for which the excess interest expenditure was first computed.
- Item (v) — paragraph 53.12: the carried forward excess interest, computed after reducing the brought forward excess interest allowable as a deduction during the year, or adding the excess interest of the year. The auditor should verify the draft computation of income certified by the management or the tax advisor.
Worked example
| Item | Amount |
|---|---|
| Interest and similar expenditure to the non-resident AE, and on AE-guaranteed debt | Rs 9,00,00,000 — item (i) |
| EBITDA per the audited stand-alone accounts | Rs 20,00,00,000 — item (ii) |
| 30% of EBITDA | Rs 6,00,00,000 |
| Total interest of Rs 11,00,00,000 in excess of 30% of EBITDA | Rs 5,00,00,000 |
| Interest paid or payable to AEs | Rs 9,00,00,000 |
| Excess interest — the lower of the two | Rs 5,00,00,000; item (iii) reports the amount by which item (i) exceeds 30% of EBITDA, that is Rs 3,00,00,000 |
| Carried forward under section 94B(4) | By assessment year, up to eight years |
Note that item (iii) of clause 30B is defined by the form as item (i) less 30% of item (ii) — a mechanical subtraction — while the disallowance under the section is the lower of the two computations in paragraph 53.2. The two figures need not be the same, and the working paper should show both.
Audit checklist
- Test the exclusions first — banking, insurance, notified NBFCs, IFSC finance companies, and Indian PEs of non-resident banks.
- Apply the Rs 1 crore test to AE interest only, excluding interest already disallowed under sections 14A, 36(1)(iii) proviso, 40A or 92.
- Identify guarantee-backed and matching-deposit debt from non-AE lenders.
- Include discount, premium, finance lease cost, guarantee commission, commitment fees and other finance charges.
- Take EBITDA from the audited stand-alone accounts, not the tax computation; treat a negative EBITDA as nil.
- Verify brought forward amounts from earlier years' returns, and track the eight-year limit.
- Verify the carried forward figure against the management-certified draft computation before completing clause 30B.
Common mistakes
- Applying the Rs 1 crore test to total interest rather than to associated enterprise interest.
- Using tax-adjusted EBITDA instead of the audited accounts figure.
- Missing guarantee-backed debt from an unrelated lender.
- Netting a negative EBITDA against the interest figure.
- Losing the brought forward balance beyond the eight-year window without claiming it.