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cash payment exceeding 10000 u/s 40A(3)

28 April 2018

Hlo frnds...
I have a doubt relating to section 40A(3)..
Whether salary paid in cash exceding rs. 10,000 to an employee by an employer in a single day disallowed or not?
Plz provide ur reviews...
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10 Replies

RAJA P M ("Do the Right Thing...!!!") (128091 Points)
Replied 28 April 2018

Yes... It's disallowed If the Payment is not an Temperory employee

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RAJA P M ("Do the Right Thing...!!!") (128091 Points)
Replied 28 April 2018

EXCEPTIONS TO PROVISIONS OF SECTION 40A(3)

No disallowance of expenses exceeding Rs. 10,000 in a day made otherwise than by an account payee cheque or account payee bank draft should be made in case of the following expenses:-

1. Where the Payment is made to:-

*Reserve Bank of India or any banking company;

*State Bank of India or any subsidiary bank;

*Any co-operative Bank or Land Mortgage Bank; *

Any primary agricultural credit society or any primary credit society;

*Life Insurance Corporation of India;

2. Where the payment is made to the Govt and, under the rules framed by it, such payment is required to be made in legal tender;

3. Where the payment is made by

*Any Letter of Credit Arrangements through a Bank

*A Mail or telegraphic transfer through a Bank

*A Book adjustment from any account in a bank to any other account in that or any other bank

*A Bill of exchange made only payable to a Bank

*The use of electronic clearing system through a Bank Account

*A Credit Card

*A Debit Card

4. Where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee

5. Where the payment is made to the cultivator, grower or producer for the purchase of the following

*Agricultural or Forest produce; or

*Produce of Animal Husbandry (including livestock, meat, hides and skins)

*Fish or Fish Products; or

*Products of Horticulture of Apiculture

6. Where the payment is made for the purchase of the products manufactured or processed without the aid of power in a cottage industry, to the producer of such products;

7. Where the payment is made in a village or town, which on the date of such payment is served by any bank, to any person who ordinarily resides or is carrying on any business, profession or vocation in any such village or town

8. Where any payment is made to an employee of the assessee or the heir of any such employee, on or in connection with the retirement, retrenchment, resignation, discharge or death of such employee, on account of gratuity, retrenchment compensation or similar terminal benefit and the aggregate of such sums payable to the employee or his heir does not exceed Rs 50,000 No Credit

9. Where the payment is made by an assessee by way of salary to his employee after deducting the income tax from salary in accordance with the provisions of the Income Tax Act , and when such employee:

- Is temporarily posted for a continuous period of 15 days or more in a place other than his normal place of duty or on a ship; and

- Does not maintain any account in any bank at such place or ship

10.Where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike. It is pertinent to note here that such payment would be allowed as an expense only when it has been proved that the payment was required to be made on the day on which the bank was closed and the payment could not have been made on a working day.

11. Where the payment is made by any person to his agent who is required to make payments in cash for goods or services on behalf of such person

12. Where the payment is made by an authorised dealer or a money changer against purchase of foreign currency or travellers cheque in the normal course of business

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