• Oct
  • 14
  • 2008

Rule 6D – Payment of More Than Rs 20,000/- in Cash

Income Tax – Payment of More Than Rs 20,000/- (Amendment In Rule 6D)

Cash payment of more then twenty thousand in a day to Single person

Rule 6D Of The Income Tax Rules Rule Deals With, Cases and circumstances in which a payment or aggregate of payments exceeding twenty thousand rupees may be made by a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft.

RULE BEFORE AMENDMENT

The main part of the Rule earlier read as,No disallowance under clause (a) of sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under clause (b) of sub-section (3) of section 40A where any payment in a sum exceeding twenty thousand rupees is made otherwise than by an account payee cheque drawn on a bank or account payee bank draft in the cases and circumstances specified hereunder, namely :-

RULE AFTER AMENDMENT

Now the amended Rule reads as, No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section ( 3A ) of section 40A where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees in the cases and circumstances specified hereunder, namely:-

In the 2008 Finance Act, Section 40 A has been amended as follows:-

Amendment of section 40A

In section 40A of the Income-tax Act, for sub-section (3), the following subsections shall be substituted with effect from the 1st day of April, 2009, namely:-

“(3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be Allowed in respect of such expenditure.

(3A) Where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year hereinafter referred to as subsequent year) the assessee makes payment in respect thereof, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, the payment so made shall be deemed to be the profits and gains of business or profession and accordingly chargeable to income-tax as income of the subsequent year if the payment or aggregate of payments made to a person in a day, exceeds twenty thousand rupees:

Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3) and this subsection where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors.”

The Government explained this amendment as follows:-

Amendment to the provisions of section 40A (3) of the Income-tax Act, Section 40A (3)(a) of the Income-tax Act, 1961 provides that any expenditure incurred in respect of which payment is made in a sum exceeding Rs.20,000 /- otherwise than by an account payee cheque drawn on a bank or by an account payee bank draft, shall not be allowed as a deduction. Section 40A (3)(b) also provides for deeming a payment as profits and gains of business or profession if the expenditure is incurred in a particular year but the payment is made in any subsequent year in a sum exceeding Rs. 20,000/- otherwise than by an account payee cheque or by an account payee bank draft. However, the provisions of this section are subject to exceptions as provided in Rule 6DD of the Income-tax Rules, 1962.

Section 40A (3) is an anti tax-evasion measure. By requiring payments to be made by an account payee instrument, it is possible to verify the genuineness of the transaction thereby mitigating the risk of evasion. It has come to notice that the provisions of section 40A (3) are being circumvented by splitting a particular high value payment to a person into several cash payments, each below Rs. 20,000/-. This splitting is also resorted to for payments made in the course of a single day. Courts have also held that the statutory limit in section 40A (3) applies to payment made to a party at one time and not to the aggregate of the payments made to a party in the course of the day as recorded in the cash book. According to the judicial opinion, the words used are `in a sum’, i.e., single sum.

Therefore, irrespective of any number of transactions, where the amount does not exceed the prescribed amount in each transaction, the rigours of section 40A (3) will not apply.

To overcome the splitting of payments to the same person made during a day as referred above and to increase the efficacy of the provision, the amendment seeks to substitute the present provision to provide that where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, the disallowance of such expenditure shall be made under the proposed sub-section (3) of section 40A or the payment shall be deemed to be the profits and gains of business or profession under the proposed sub-section (3A) of section 40A , as the case may be.

To illustrate with an example, let us assume a taxpayer has incurred an expenditure of Rs 40,000/-. The taxpayer makes separate payments of Rs 15,000/-, Rs 16,000/- and Rs 9,000/- all by cash, to the person concerned in a single day. The aggregate amount of payment made to a person in a day, in this case, is Rs 40,000/-. Since, the aggregate payment by cash exceeds Rs 20,000/-, Rs. 40,000/- will not be allowed as a deduction in computing the total income of the taxpayer in accordance with the proposed amendment.

The proviso to the proposed sub-section (3A) provides that in certain prescribed cases and circumstances the provisions of proposed sub-sections (3) and (3A) shall not apply.

This amendment will take effect from 1st April, 2009 and will accordingly apply in relation to assessment year 2009-10 and subsequent assessment years.

Accordingly Rule 6DD is amended accordingly.CBDT Notification No. 97/2008 [F.NO. 142/10/2008- TPL], Dated: October 10, 2008


125 Responses to “Rule 6D – Payment of More Than Rs 20,000/- in Cash”

  1. Hanif says:

    Can partner made deposit or withdraw in partnership firm more than Rs. 20000/-?
    Is there any limit for partner?

  2. chetan goel says:

    i like to know can we purchase assets more than 20000 in cash

  3. hitesh says:

    Respected sir
    i am a automobile dealer and i am purchased my trading goods from various dealer and various station but when the bill amount are more then 20000/- can i pay this tading goods amount in cash. sir i have face many problem due to more dealer not accept cheque of my firm they only want cash against the bill. so please requred to guide me can i purchased trading goods more then 20000/- in against of cash bill. please sir help me

  4. balotra urbancoop bank ltd says:

    should bank pay bearer third party cheque more than 20000/

  5. Dhiraj says:

    yes u can provide more than 20000 for imprest fund

  6. dilip says:

    whether it is applicable to fixed assets or not???

  7. Sanjana says:

    I have made the voucher below rs. 20000/- for diff. days. In a year i have paid the sum of Rs. 100000/- by cash for income tax purpose what effect should go for pvt. ltd. co. return filling purpose . Pl. Note that this is deposit amt. we have paid .

    Actually our co. take a rental basis factory but the factory is not good condition so that exp. incurred on behalf of that owner paid by us . so that exp. we have recovered as a deposit from him

  8. MA Gafoor says:

    i want to know that any rules in IT is that the company proprietorship can pay the salary to our employee in cash > 30,000/- if yes so which rules u/s and how much cash can pay in a month please advice me
    Thank.

  9. pinki says:

    help
    for example :- a one person by bike 50,000 and he pay in advance to 19,000.please tell me how many days he pay his balance payment amd what his interest,plz tell me how calculate and what a formula.

  10. manish says:

    Sir ,

    Can i paid more than Rs.20000/- in cash to 1 fuel station for fuel filling in my many vehicles?

  11. ujjwal goyal says:

    if there is a concern who has a dealership of a motor bike company ….
    they receives an advance of rs 21000 from a customer in cash nd book a bike but after 2-3 days the costumer comes back and tell them that he is not able to purchase bike and take refund of 21000 in cash…

    is this cash payment made by such concern of rs 21000 in cash for return of advance money is disallowed or not????
    please answer
    ujjwalgoyal15@gmail.com

  12. Anil says:

    If payment of Rs.50000 is made in cash, will be legally enfoceable debt?

  13. Arun says:

    I want to pay 60k cash to one party , can i pay 20k one day 20k second day, and rest third day.
    what is the cash payment limit for the year for one party/ or individual

  14. sharad marathe says:

    Dear Sir

    please help for one person Cash on Salary maximum limt which?

    Thanks & Regards,

    Sharad Marathe

  15. sharad marathe says:

    Dear Sir,

    Empoloyee one Person Salary in Cash maximum limit which Rs.?

  16. NV satyanarayana says:

    What is the maximum limit of cash that can be paid towards purchase of agricultural land to a single person in a day ?

  17. Fanindra Sahoo says:

    How much we can pay in cash in one day to party?

  18. Kalyan says:

    Sir,

    My company paid Rs.300000/- towards cost of Iron towards cost of constructing another branch in cash. Whether it attracts 40A(3)section?

  19. NIKHIL says:

    WHAT TREATMENT HAPPEN IN CASE PAYMENT EXCED 20000

  20. V J Raghunandan says:

    I have a question regarding cash payments of above Rs.20,000/-. I understand that this limit of Rs.20,000/- is not applicable if I want to avail of a loan on my deposits with any Bank – that is, if I am availing a loan on deposit, I can take the loan in cash even if it is beyond Rs.20,000/-. Is my understanding right? (2) This limit of Rs.20,000/- also does not apply to payment of interest. If I have a deposit of say, Rs.5.00 Lakh with a Nationalised Bank and presuming the ROI to be at say, 10.00% p.a. and if the interest pay-out is half-yearly, then, I can insist that the Bank makes the interest payment in cash every half-year even if the same is above Rs.20,000/-. Is it correct? I request any of the enlightened readers to educate me on these points.

  21. BALRAJ VERMA says:

    Sale of Plant and machinery as scrap can accept Rs 200000 or more cash in that case also 40A(3) applied or not?

  22. Rajesh says:

    My question is that we sell products .Although the sale is below RS 20000/-.They insist on cash memo without any name that is Cash Sale. I would like to know what is the maximum  limit of cash sale in a year as per Norms.

  23. rajesh talankar says:

    if i sell my house, & party pays in cash, how much amount can be deposited in cash in savings account in a day ?

  24. Sandip Kumar Dalal says:

    It is understood that nobody can pay in excess of Rs.20,000/- to a party on a single date in cash as per rule 6DD.
    But I want to get confirm what is the annual limit if a single voucher/paid on single date below Rs.20,000/-.

    I seek your kind advise

  25. Dave says:

    Is cash payment exceed rs 20000 on single day to a single person for RTO work is allow?

  26. venkatesh says:

    If i purchase of capital goods for more than rs.20000. What is the treatment as per income tax act 1967 section 40a3

  27. Kuldeep Sharma says:

    Suppose A has purchase goods from B. C owes A some money. C on instructions from A makes payment by an Account Payees Cheque to B. Will such payment by hit by section 40(A)(3)

  28. Manoj Kumar says:

    If i am going to holiday and booked a room in hotel , if my check out bill amt exceed 20,000/- . Is it compulsory to submit PAN copy there.

  29. Jijo says:

    Sir, Paid 200000 one day for cash purchase for trading(not capital goods). is allowable?

  30. Dr. Ibadatpreet says:

    i am a masters student in dentistry in amritsar. we are provided with the monthly pay of 20,000 rupees. the course duration is 3 years.however, the college authorities have provided me the pay of my all the three years in the current year. A tax of about 45,000 has been calculated by them. But is there any way to save it. is the income of 3 years taxable in 1 year. can’t we divide it in three years as I was supposed to get? Help?

  31. sameer says:

    i m trader of agricuture product. can paid more then 20.000 cash of agricultrist?

  32. SHIJU says:

    NO THAT IS GOOD

  33. Pradeesh says:

    I have a expense bill of Rs500000/- and made payment of amounts less than 20000/- in various days(single day amounts not exceeding 20000/-). Is it applicable for disallowance u/Sec 40(A)(3)

  34. admin says:

    Yes it do attract.

  35. ANAND says:

    WHETHER PAYMENT OF HONORARIUM TO DIRECTORS PAID IN CASH IN EXCESS OF RS.20000/-ATTRACTS THE RULE 6DD OF INCOME TAX ACT .

  36. amal says:

    as we know that we can’t pay more than 20000/- cash to a party in a single day, is there any barrier / rules regarding any received entry .

  37. surya says:

    can i pay more than Rs.20000 in cash to my creditor who has no any bank account?

    Give reply soon

    Thanking you

  38. smita says:

    can we deposit more than Rs. 20,000/- in our contractors saving account instead of paying in cash in a single day. doese this will be disallowed kindly guide in this matter.

  39. smita purandare says:

    whether payment by cash to MGVCL and GEB will be disallowed ?

  40. Eshani Shah says:

    If a trust has paid bonus to certain employees in cash in excess of 20000 in a day then is the expense disallowed?

  41. chetan sehgal says:

    if a person get its expense reimbursed and the company has made the payment of more than 20000, but all the bills are bills are below 200000 the account head is (travelling expense)

  42. Sarat C Das says:

    when buying an existing company shares is it legally permissible to buy the shares in cash? We have about 20 shareholders who are going to buy all the shares of a company with equity of about Rs.30.00 lacs. We would like to know if it is possible to buy the shares in cash payments.

  43. rizwana says:

    can we bankers give cash payment for more than rs.20000/- to the party who has born the cheque if he is not having pan card(our account holder has given cash cheque in the name of xyz)

  44. admin says:

    Thanks Nehal

  45. NEHAL says:

    hey 35000 in a day hai so i feel sandeep bhai theek hai

  46. Deepanshu goyal says:

    Sandeep bhai tum galat ho. It is allowed.

  47. Deepanshu goyal says:

    It is disallowed.

  48. Deepanshu goyal says:

    Gandhi is right.

  49. Girish khubchandani says:

    20000 lim ka logic to law makers hi bta sakte hai but sec ka logic hum bta sakte hai.

  50. Girish khubchandani says:

    Sandeep is right.

  51. Girish khubchandani says:

    Here payment is made through a/c payee cheque so no disallowance. But it is an expense.

  52. Girish khubchandani says:

    100% satisfy with MR Sandeep kanoi.

  53. Girish khubchandani says:

    Sec 194C can apply in ur case if d conditions of sec satifies.

  54. Girish khubchandani says:

    Sec 194C can apply in ur case if d conditions of d aforesaid sec comply.

  55. Girish khubchandani says:

    For freight exp lim is 35000

  56. Girish khubchandani says:

    Purchase of shares is not expense but an investment so sec 40A(3) NOT APPLY.

  57. Girish says:

    Dep does not involves any cash outflow so sec not apply. HOWEVER IS AN EXPENSE

  58. Girish says:

    Yes it is Allowed

  59. Parteek Jain says:

    cash payment of more than 20000 for shares purchase is allowed as per income tax act?

  60. micky says:

    is it eligible if payment made to different parties in excess of 20000

  61. sudheesh says:

    SIR
    I AM WORKING IN A PRIVATE COMPANY.HERE WE PAID AN AMOUNT IN EXCESS OF RS.20000/- RELATED TO FREIGHT FOR RAW MATERIAL .WHETHER IT ALLOWED AS DEDUCTION.ALSO WHAT IS THE LIMIT FOR PAYING THE AMOUNT AS PER NEW AMENDMENT

  62. ajay goyal says:

    any sum paid to govt. is allowed as per rule 6DD of r.t. acr.

  63. yash gandhi says:

    YES , PROVIDED THE VOUCHER PREPARED BY EMPLOYEE EXCEEDING RS 20000

  64. yash gandhi says:

    NO DISALLOWED BECAUSE IT IS NOT AN EXPENSE

  65. yash gandhi says:

    TO PREVENT FRAUD

  66. yash gandhi says:

    AS PER RULE 6DD IT IS ALLOWED.

  67. yash gandhi says:

    YES , IT IS ALLOWABLE, BECAUSE TRANSFER DOES NOT AMOUNT TO EXPENSE.

  68. yash gandhi says:

    NO DISALLOWANCE SHALL BE ATTRACTED U/S 40A(3) OF I.T. ACT. BECAUSE FOR THE APPLICABILITY OF THIS PROVISION EXPENDITURE AS WELL AS PAYMENT SHALL BE EXCEED RS 20000

  69. yash gandhi says:

    IT IS ALLOWED AS PER SEC40A(3) OF I.T ACT .BECAUSE IT IS NOT AFFECT P&L A/C .

  70. rinku says:

    ya it’s legally ok, u can transfer cash>20000 because it is not expensive it is cash transfer, branch can not paid in cash expense more than 20000

  71. rinku says:

    it based on your hra, if your hra is 5000 per month. you can get tax rebait. you need to submit rent paid receipt. or you can claim on the time on itr filling

  72. rinku says:

    yes sir ji, but company liability to deduct tds on employee total annual salary, which is been submitted in tds return.

  73. rinku says:

    yes, ur liabialty become of when u hav paid for than 5000, for commision u must deduct tds, for this u need tan no., tds deduct of various rate as per rule & regulation.

  74. mohan kushwah says:

    Can a company pay Salary to its staff (Single Person) to exceeds the limit more than Rs.20000/-.

  75. nagappan ramanathan says:

    i will purchased for Rs.1,00,000/- single bill value if cash bill or invoice bill against cash allow on time single cash entry voucher

  76. sheetal says:

    we had paid cash more than rs. 20000/- to payment to contractor we are applicable to deduction of tds

  77. CA Parmeshwar says:

    No. this section is applied only to the expenditures.

  78. shankar says:

    sir i having housemaid , i pay her 5000 / month , can i get tax exemption

    form salary paid to a house maid , in cash , which documents will require to submit

    tax exemption , thnks shankar 0 98 19 19 19 40

  79. Arun Acharya says:

    Sir,

    If any Saving Bank account is closed by a bank at the request of client and the Balance in excess of Rs. 20,000/- is paid in cash

  80. Amit kumar agrawal says:

    IF ADVANCE PAID TO A CONTRACTOR RS. 50000 FOR FURNITURE WORK OF OFFICE IN A SINGLE DAY THROUGH CASH. THIS WILL ALLOWED OR DISALLOWED .

  81. DIPAK KIMAR JAIN says:

    sir,
    My question is if we are a Pvt.Ltd.company engaged in manufacturing of edible non taxable items. we sales the goods to differenet party and they give cash payment to us of the said bill.The amount may be in lakh also whether this transaction is allowed by I.T.law or not .if no please so the section reference no.

    thanks
    DIPAK JAIN
    09836525687

  82. sukhminder says:

    Can a company pay Salary to its staff (Single Person) to exceeds the limit more than Rs.20000/-.

  83. jhonpaul says:

    i have trading bussines in chennai and i sale the matrial in cash and as such i use to purchase the material in cash and if the amount goes more than rs.20000.00 pls give advise.

  84. Goutam Roy says:

    Sir. form dated 01.07.2010 new ammendmemd that cash payment form 20000 to 30000 single payment can be paid form not deducted tds. but i want to know if payment 25000 cash for advane to sundry creditors or debtors or some loan for reveived or payemt . aallow?

  85. Vishal Joshi says:

    40A(3) of IT Act 1961 – Applicable to employee reimbursements

  86. Bhoj P Singh says:

    What is the limit of cash payment as per Income tax

  87. Raja Kumar says:

    Cash transfere from branch to branch is this up to 20000 is eligabile as per IT ACT

    Please clarify.

  88. nikhil vayeda says:

    Applicability of Rule 6DD in case where bill is of Rs. 15000/- Rs.10000/-and Rs.18000/- in a day and payment made by cash Rs. 43000/- on same day i.e. 15/10/2007 and 15/10/2009

  89. chetan says:

    Can a loan disbursing company disburse a loan of Rs 20000 in cash?

  90. salome says:

    What about capital expenditure u haven’t replied to that yet!!

  91. Nitin Gokarn says:

    Sir, If a Charitable regd Instn holds a charity show and has to pay the artiste a sum of Rs 50000 by cash will Rs 30000 be treated as profits and not allowed for deduction ? Is it possible to split this amount on different dates on the voucher but to same person ?

  92. SARAVANAKUMAR says:

    PURCHASE OF RAW METERIALS IN PRODUCTION COMPANY. HOW TO LIMIT OF CASH PURCHASE

  93. girish kamath says:

    If we purchase assets and paid more than 20000/- say for ex: 60000/- furniture purchase then payment made in lumsum by cash whether it allowable

  94. gaurav says:

    should i pay bearer third party cheque more than 20000 cash.

  95. Akhil says:

    If “advance” made to company staff, above Rs.20000/-. Whether it allowable u/s 40(A)(3) of IT Act.

  96. UTTAM says:

    WHAT IS THE LIMIT OF CASH PAYMENT & RECIEPTS AGENST SALE & PURCHASE BILL’S

  97. deepak sane says:

    No any payment made thru the agent of the payee exceeds rs.20000/- is not dis allowed

  98. Aunali Moiyadi says:

    whether amount paid to employees as reimbursement of expenses incurred during official tour will get disallowed if exceeds Rs.20,000/-

  99. Shakti Goyal says:

    Plz tell me , if payment made in cash to contractor more than Rs.20000/- in a day is alloweds as expense.
    and more than Rs.500000/- in ayear, in cash payment is allowed as expense.

  100. Rekha says:

    If individual GR’s of a transporter are of 50000/- and payment made at a time Rs. 50000/-in a single day, will it apply?

  101. viney says:

    THE PAYMENT AGAINST CAPITAL GOODS CAN BE MADE EXEEDED 20000 ?

  102. HARSH GOENKA says:

    a company is paid Rs. 65000/- to a contractor. But it showed that there are 4 bill, each less than Rs. 20000/-, of different dates. Will this payment is disallowed u/s 40A(3)?

  103. salary advance paid to employee in execess of Rs.20000 is it allowed in income tax act says:

    salary advace paid to employee an amount of Rs.50000 is it allowed in income tax act

  104. P.Srinivasa Rao says:

    More than Rs.2000 paid to customers in Construction & paddy brokerss & Ricc Millers. Is it correct or not?

    please reply te me

    P.Srinivasa Rao
    Tadepalligudem

  105. Vicky says:

    purchase of stamp paper fo rs 500000 in cash. will this expenses dissallowed ?

  106. IF A COMPANY PAID EXCEED RS.20000/- FOR 13-14 DAYS WORKS THROUGH ONE ACOUNT PAYEE CHEQUE. IS IT DISALLOWED U/S 40(A)(I)

  107. Yes and Your expense will get disallowed.

  108. Harpreet Singh says:

    If individual GR’s of a transporter are of less than 20000/- and payment made at different times exceeds 35000/- in a single day, will it apply?

  109. Rajenn says:

    I have received payment against sale of product in cash more than Rs. 20000/- and at the time of settlement I need to pay tham more than rs. 20,000/- will it allawable

  110. Cash transfer to branch is not expense.

  111. sagar kr Rana says:

    Cash more than 20000 transfer to Branch/Site office is allowable Expenses U/S 40A(3)???

  112. D.Tirumala says:

    is sec 40A(3) apply for fixed assets either depriciable or not

  113. AMIT BAJAJ says:

    do the capital expenditure incurred in violation of section 40A(3) will be added to income. since no deduction of capital expenditure is taken from income can it be disallowed in such way to result in addition of income.

  114. Payment to government can be maid in cash too and will be allowable.

  115. i have paid cash for property tax of Rs-40000 is it disallowable

  116. You can pay more then 20000/- in a day to one person even if bills are of different dates.

  117. shipra says:

    what if bill nos.are different but payment is made on the same date to same person..all at different time during the day

  118. Meenal says:

    What is the logic behind seting the limit to Rs. 20,000/- u/s 40a (iii)

  119. Uma V says:

    If an “advance” of Rs. 1,50,000 for court fee is paid in cash, does it result in violation of rule 6DD of the Income Tax Act,1961.

  120. No Limit is 20000/- per person.

  121. what about expenses paid to different people on the same day but the aggregate expenses increase 20000/- will section 40A(3)apply?

  122. If a company made advance payment to hos emloyee in cash for Rs.2 Lacs, Employee deposited this sum in his personal account and made payment for expenditure on behalf of company through account payee cheque from his personal account.

    Whether Provision of section 40A(3) shall apply to company? or expenditure will allow to co.?

    Please comment……..

  123. Sandeep Kanoi says:

    Advance do not amount to expense. It depend how emplyeee prepare his voucher. He expense in a day should not exceed 20000 and to avoid litigation one voucher amount should also not exceed 20000/-

  124. amit says:

    If any company make payment exceeding Rs.20000 to their employee as a tour advance in that case also 40A(3) applied or not?

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