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Cash payment

NARENDRA (ACCOUNTS MANAGER) (1782 Points)

28 December 2012

SHALL WE PAY TO ONE TRANSPORTER BUT FOR SO MANY VEHICLES MORE THAN 35000/- IN A DAY ?

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5 Replies

kavitha (studying final) (830 Points)
Replied 28 December 2012

no you can not pay more than 20000 in cash in a single day to same party . it is disallowed under income tax act.

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kavitha (studying final) (830 Points)
Replied 28 December 2012

ncome tax has some rules to minimize the evasion of the payment made in cash. These rules are as follows.

1- Section 40A(3) a It provides that any expenditure incurred as a payment in sum of exceeding Rs.20000/- otherwise of paying with payee account cheque, demand draft or any transaction made by banks like RTGS, shall not be allowed as a deduction. However if payment is being made for hiring or leasing, the limit is 35000.

2- Section 40A(3)(B) It also provides that the payment will be deemed as profits of the business if the expenditure incurred in the books but payment is made exceeding Rs. 20000 in cash, otherwise of paying with payee account cheque, demand draft or any transaction made by banks like RTGS.

3- Section 40A (3) It provides that the payment in a single day should not be exceeding Rs. 20000. It doesn’t mean the single payment shouldn’t 20000 but the aggregate amount should not exceed the limit. Some parties split high value payment into several cash payment for evasion of section 40A (3) a, so this rule is for evasion of payments.

4- There is also a rule that payment made to a person in a single day, otherwise of paying with payee account cheque, demand draft or any transaction made by banks like RTGS, exceeds the limit; the payment will be deemed as profits of the company according to proposed sub-section (3) of section 40(A).

CA Mansi Kotecha (Keep Smiling !!) (6890 Points)
Replied 28 December 2012

Noo..in a single day to same party !!

CA Gaurav Ajit Potdar (Chartered Accountant) (846 Points)
Replied 28 December 2012

According to sec40A of income tax act 1961 cash payment to transporter is allowable to the extent of 35000/- in a day.

CMA RAVI (ASSISTANT MANGER - FINANCE) (478 Points)
Replied 28 December 2012

Originally posted by : kavitha
	ncome tax has some rules to minimize the evasion of the payment made in cash. These rules are as follows. 1- Section 40A(3) a It provides that any expenditure incurred as a payment in sum of exceeding Rs.20000/- otherwise of paying with payee account cheque, demand draft or any transaction made by banks like RTGS, shall not be allowed as a deduction. However if payment is being made for hiring or leasing, the limit is 35000. 2- Section 40A(3)(B) It also provides that the payment will be deemed as profits of the business if the expenditure incurred in the books but payment is made exceeding Rs. 20000 in cash, otherwise of paying with payee account cheque, demand draft or any transaction made by banks like RTGS. 3- Section 40A (3) It provides that the payment in a single day should not be exceeding Rs. 20000. It doesn’t mean the single payment shouldn’t 20000 but the aggregate amount should not exceed the limit. Some parties split high value payment into several cash payment for evasion of section 40A (3) a, so this rule is for evasion of payments. 4- There is also a rule that payment made to a person in a single day, otherwise of paying with payee account cheque, demand draft or any transaction made by banks like RTGS, exceeds the limit; the payment will be deemed as profits of the company according to proposed sub-section (3) of section 40(A).