Salary / wages payment

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 March 2017 IF SALARY / WAGES PAID THROUGH CASH TO DIFFERENT EMPLOYEES IN BETWEEN 10,000 TO 25,000 & REGISTER TOTAL TO A TUNE OF SAY Rs.4,00,000 FOR AN ESTABLISHMENT
APPLICABILITY OF section 40A (3) was introduced to be applicable from the assessment year 1969-70. Under this clause, all payments exceeding ` 20,000 are to be made only through a crossed cheque or a crossed bank draft. So, if any payment exceeding ` 20,000 is made otherwise than through a crossed cheque or draft, then 100% [upto Assessment Year 2007-08 it was only 20%] of such amount is to be disallowed as deduction while computing income under this head of income. MAY PLEASE BE CLARIFIED

CA DHAVAL MISTRY

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13 March 2017 Section 40 A(3) says, payment of any expenditure to a single person on any 1 day is not allowable subject to exemption and relaxation given under that section. So, if payment made to various employees in cash which is below Rs. 20, 000 than in that case, whole payment is allowable. However, if payment is made to any employee above Rs. 20,000 on any day than in that case, such expenditure is disallowed.