Disallowance of Expenditure made in Cash- Section 40A(3) & 3(A)
(Read with Rule 6DD)
(Read with Section 269 ST & Section 271 DA of Income Tax Act, 1961)
(Read with Notification 08/2020)
Any payment made to a Person, in a day, for a single Bill exceeding Rs. 10,000 (For Goods Transport Agency Rs 35,000) other than prescribed mode will be disallowed under this Section.
Suppose Mr. A makes the following Payment in cash
|Date||To Party||Invoice No||Amount||Total||Disallowance under 40A(3)||Reason|
|01-Apr-20||B||ABC1/20-21||12000||12000||12000||Single Payment on same date for Single Bill for Same Party exceeds 10000|
|02-Apr-20||C||ABC2/20-21||9000||9000||Nil||Single Payment on same date for Single Bill for Same Party does not exceeds 10000|
|03-Apr-20||D||ABC3/20-21||5000||14000||14000||Multiple Payments on same date for Single Bill to Same Party exceeds 10,000|
Amount Rs 30000
|5000||30000||30000||Multiple Payments different dates for Single Bill to Same Party exceeds 10,000|
Where any Expenditure is made and deduction is allowed in previous year but payment is made by other than prescribed modes exceeding Rs. 10,000 then such expenditure will be treated as Income of current year.
Rule 6DD- Exceptions to Section 40A(3) and 40A(3A)
In the Following cases, even if payment is made in other than prescribed modes, no disallowance will be attracted.
1) Any Payment made to:
2) Payment made to Government for any Taxes, Duties, Registry etc- Such payment shall be made in Legal Tender.
3) Payment made by-
4) Any Payment made for any Liability through book adjustment against any goods supplied/services rendered by person on whom liability was there.
5) Payment made for the following purposes to the Cultivator, Grower or Producer-
6) Payment made to person who resided in village and carries any business or profession in such village and on the date of payment, that village is not served by any Bank.
7) Payment made to Employees or their legal heirs for purpose of retirement, retrenchment, resignation, discharge or death and such payment is not exceeding 50.000
8) Payment made to Employee who is posted to another place for continuous period of 15 days or more- Such Payment shall be made after deducting TDS & Employee shall not have Bank Account at that Place.
Section 269 ST Mode of Undertaking Transaction
No Person shall Receive an amount of 2,00,000 or more.
through other than modes prescribed for payments under Notification 8/2020
Exception to Section 269 ST
Any Receipt by
Section 271 DA Penalty for Failure to comply with Section 271 DA
Penalty shall be equal to Amount to such Receipt.
Notification 8/2020– Other Prescribed modes-
(a) Credit Card;
(b) Debit Card;
(c) Net Banking;
(d) IMPS (Immediate Payment Service);
(e) UPI (Unified Payment Interface);
(f) RTGS (Real Time Gross Settlement);
(g) NEFT (National Electronic Funds Transfer), and
(h) BHIM (Bharat Interface for Money) Aadhar Pay