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Cash expenditure above 20,000 as Salary

Ankit Joshi (article) (38 Points)

11 March 2011

Hi everybody,

one of our clients have paid a salary of Rs.30,000/- in cash to a single employee. As far i know wages given in cash is not a disallowed. but does the same apply for salary also.

Thanks.

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7 Replies

Lalit Kumar (Vice President ) (2213 Points)
Replied 11 March 2011

Any payment for Expenses above rs 20,000 in cash. So salary paid in Cash would be disallowed u/s 40A(3).. and in my view even wages are disallowed if paid above 20k. There is no exception for wages given in rule 6DD..But payment in cash upto 35k can be made if it is to Transporters.

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vikaskamra (CA Final Student) (132 Points)
Replied 11 March 2011

as far as income tax is concerned it does not make any distinction between wages and salaries........hence disallowed............

Sunshine (Helping All) (10575 Points)
Replied 11 March 2011

agree with both...it will be disallowed u/s 40(A)(3)...IT Act doesnt make distinction between wages and salaries..

john (LEARNER) (549 Points)
Replied 12 March 2011

If Mr. A has 5 labours & 2 office staffs

for each labour he pay approx 2500-3000 per week i.e aproxx 12000 p.m. in CASH to each labour.

for office staff he pays Rs.12000/-pm & Rs.13000/-p.m Respectively to 2 staffs. in CASH.

he does not fall under Tax Audit

Q. salary & wages in above case allowed or disallowed?

Q. is he required to deduct TDS on salary & wages. ? if NOT

Q. In future from what point he would be liable to deduct TDS.?

Indian (CA) (53 Points)
Replied 12 March 2011

Originally posted by : john
	If Mr. A has 5 labours & 2 office staffs for each labour he pay approx 2500-3000 per week i.e aproxx 12000 p.m. in CASH to each labour. for office staff he pays Rs.12000/-pm & Rs.13000/-p.m Respectively to 2 staffs. in CASH. he does not fall under Tax Audit Q. salary & wages in above case allowed or disallowed? Q. is he required to deduct TDS on salary & wages. ? if NOT Q. In future from what point he would be liable to deduct TDS.?

All the expenditure i.e. wages and salaries are below Rs 20,000 per person and hence even if paid in cash are allowable.

No tax is to be deducted on the same as they are under the threshold limit i.e. 1,60,000 for FY 2010-11 and Rs 1,80,000 for FY 2011-12.

Tax is to be deducted once the salary and / or wages is above the threshold limit.

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CA Ravish Trivedi (The Possibilities are Infinite...) (772 Points)
Replied 13 March 2011

There is exception in which an assessee can pay salary in cash exceeding Rs. 20000. If its employee is tempoearily posted for a continuous period of 15 days or more in a place other than his normal work place and employer doesn't maintain any bank account at that place.

Prabhaharan (Internal Controller) (57 Points)
Replied 13 March 2011

There is an exception for temporary posting, however such payment shoud made after deduction of TDS and also such employee does not maintain any bank account at the place of temporary posting

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