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
If a trust has paid bonus to certain employees in cash in excess of 20000 in a day then is the expense disallowed?
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)
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.
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)
cash payment of more than 20000 for shares purchase is allowed as per income tax act?
is it eligible if payment made to different parties in excess of 20000
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
YES , PROVIDED THE VOUCHER PREPARED BY EMPLOYEE EXCEEDING RS 20000
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
Can a company pay Salary to its staff (Single Person) to exceeds the limit more than Rs.20000/-.
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
we had paid cash more than rs. 20000/- to payment to contractor we are applicable to deduction of tds
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
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
IF ADVANCE PAID TO A CONTRACTOR RS. 50000 FOR FURNITURE WORK OF OFFICE IN A SINGLE DAY THROUGH CASH. THIS WILL ALLOWED OR DISALLOWED .
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
Can a company pay Salary to its staff (Single Person) to exceeds the limit more than Rs.20000/-.
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.
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?
40A(3) of IT Act 1961 – Applicable to employee reimbursements
What is the limit of cash payment as per Income tax
Cash transfere from branch to branch is this up to 20000 is eligabile as per IT ACT
Please clarify.
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
Can a loan disbursing company disburse a loan of Rs 20000 in cash?
What about capital expenditure u haven’t replied to that yet!!
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 ?
PURCHASE OF RAW METERIALS IN PRODUCTION COMPANY. HOW TO LIMIT OF CASH PURCHASE
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
should i pay bearer third party cheque more than 20000 cash.
If “advance” made to company staff, above Rs.20000/-. Whether it allowable u/s 40(A)(3) of IT Act.
WHAT IS THE LIMIT OF CASH PAYMENT & RECIEPTS AGENST SALE & PURCHASE BILL’S
No any payment made thru the agent of the payee exceeds rs.20000/- is not dis allowed
whether amount paid to employees as reimbursement of expenses incurred during official tour will get disallowed if exceeds Rs.20,000/-
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.
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?
THE PAYMENT AGAINST CAPITAL GOODS CAN BE MADE EXEEDED 20000 ?
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)?
salary advace paid to employee an amount of Rs.50000 is it allowed in income tax act
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
purchase of stamp paper fo rs 500000 in cash. will this expenses dissallowed ?
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)
is sec 40A(3) apply for fixed assets either depriciable or not
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.
i have paid cash for property tax of Rs-40000 is it disallowable
what if bill nos.are different but payment is made on the same date to same person..all at different time during the day
What is the logic behind seting the limit to Rs. 20,000/- u/s 40a (iii)
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.
what about expenses paid to different people on the same day but the aggregate expenses increase 20000/- will section 40A(3)apply?
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……..
If any company make payment exceeding Rs.20000 to their employee as a tour advance in that case also 40A(3) applied or not?