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Cash Transaction between individuals

Ganeshi Lal Agarwal (Accountant) (45 Points)

30 April 2010

Dear All,

Kindly advise wheather the cash payment of house rent of more than Rs. 20 Thousand per month by a salaried person (of foreign country, employed in Indian company) to another individual is allowed. Will he be allowed for HRA exemption due to cash payment of more than Rs. 20 Thousand.

If there will be any different treatment if that salaried persom pays such amount to some company or partnership firm.

In either case he has executed a lease deed/ Rent agreement with the landlord.

Thanking you all in advance for your early positive response.

Ganeshi LAl Agarwal

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9 Replies

Ashish Sharma (Service) (1028 Points)
Replied 30 April 2010

Yes, Payment can be made in excess of 20000/- in cash and even can claim HRA no restriction for individual salaried person for payment his expenditure in cash more than 20000/-

1 Like

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CA Sanjay Jha (ACCOUNTS MANAGER) (914 Points)
Replied 30 April 2010

Mr Ganeshi

For HRA exemption not to be required rent to be paid in cheque only, so he can claim

but in Rent receipt PAN NO. of owner must be wtittren in correct otherwise u have to punished

second things Rent Agreement must be created and sign both the parties

then u have to paid any money as rent in cash no any objection b y ITO and employer

1 Like

Rachit (Analyst) (913 Points)
Replied 30 April 2010

Dear Ganeshi

Sec.40A lays down the conditions on the basis of which expenses or payments are not deductible in certain circumstances. It is applicable only case of computation of income under the head PGBP.

Hence in your case my views are under:

1) Rent payment > 20K would be allowable for HRA exemption as 40A is not applicable to Salary income.

2) HRA exemption would be allowable (supra)

1 Like

Ganeshi Lal Agarwal (Accountant) (45 Points)
Replied 30 April 2010

Dear All,

Thank you very much for your very quick response.

One more query in this regard please:

Can this foreign employee at his arrival to India first time take personal cash from a freind or so to meet out his initial requirement like - payment of advance rental, security deposit with landlord etc. as he will get his salary after a month from the employer and also at the moment he does not have any bank account. Also he does not carry the foreign currency.

Looking forward for assistace in the matter.

Ganeshi Lal Agarwal

Rachit (Analyst) (913 Points)
Replied 30 April 2010

Sec 269SS prohibits a person from taking loan or deposit of an amount exceeding Rs.20K.

Remedy in your case is to let the foreign resident open a bank account . You may issue him a cheque as loan.

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Pradip Narsingani (Income Tax & GST Consultant/ CA-Final) (572 Points)
Replied 30 April 2010

hi according to Me

Sec.40A lays down the conditions on the basis of which expenses or payments are not deductible in certain circumstances. It is applicable only case of computation of income under the head PGBP.

Therfore in your case my views are under:

1) Rent payment > 20K would be allowable for HRA exemption as 40A is not applicable to Salary income.

and

2) HRA exemption would be allowable

sudhir rawal (B.COM/PCC/ARTICLE/'O'LEVEL) (314 Points)
Replied 01 May 2010

here i want to say something that

if you are salaried person and nothing having any business income

rarely i had seems those person who has both income from salary and as well as business

now when you want to get HRA exemption then their is no problem that you are paying rent for your personal purpose and not for business purpose

you can get HRA exemption at all

and it's not allowed to deduct rent from business income because it's your personal income and if you are paid from you business expenses then it will deduct through you capital then the profit and loss a/c will not allow

finally there is no certain issue for disallow your amount paid is exceeding rs 20,000

in this query

if i'm wrong the correct me

vikash rathi (Chartered Accountant) (787 Points)
Replied 01 May 2010

Originally posted by : Pradip Narsingani
	hi according to Me Sec.40A lays down the conditions on the basis of which expenses or payments are not deductible in certain circumstances. It is applicable only case of computation of income under the head PGBP. Therfore in your case my views are under: 1) Rent payment > 20K would be allowable for HRA exemption as 40A is not applicable to Salary income. and 2) HRA exemption would be allowable