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Maximum cash payment in a year

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How much can i pay to labor controctor in a year through cash . If it is more than 20000/- in a year is it disallowed ?

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14 Replies

CA Abhishek Goyal (Chartered Accountant) (516 Points)
Replied 30 October 2014

Hello.

There is provision like you can not pay more than rs. 20000/- to a single party on a day. If you do so, it will be disallowed. Rs. 20000/- criteria is for a day not for a year.

Thanks.

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Dilip (chief Accounts Officer) (79 Points)
Replied 30 October 2014

Agreed with Abhihek

Rohit Aggarwal (M.Com) (23 Points)
Replied 31 October 2014

Right 20000 for a day not a year

Mihir (Wealth Manager) (5293 Points)
Replied 31 October 2014

Yes, you may pay to labour contractor Rs. 20,000/- in cash. It will be allowed. Check TDS provision.

vipender (student) (25 Points)
Replied 31 October 2014

20000 is for a single day as per section 40A(3)

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saranraj thangaraj (articled assistent) (121 Points)
Replied 31 October 2014

Per bill per day cash should not exceed rs.20000 and for per year rs.75000...Iif exceeds it will b disallowed..

Sameer Thane (Consultant) (35 Points)
Replied 31 October 2014

Payment to a contractor above threshold limit requires deduction of TDS. If pan is not available then TDs is required to be deducted at 20% and again if TDs is not deducted (either at specified rate or 20%) the expense is disallowed.. Be careful.. Thx

Bhag Chand Jain (Manager- Finance & Accounts) (23 Points)
Replied 31 October 2014

20000 in a day and total payment in a year to contractor 75000 if u do not deduct tds

Satya Gopal Nethi (Student CA Final ) (25 Points)
Replied 31 October 2014

@ saranraj thangaraj Will it be disallowed if it exceeds 75k in a year It just attracts TDS provisions but not disallowed

HARISH (ARTICLE) (25 Points)
Replied 31 October 2014

If Cash Payment exceeding Rs. 20000/- made in aggregate in a single day to a party then the expense is disallowed as per section 40A(3) & 3A.

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priyesh (student) (86 Points)
Replied 31 October 2014

CA Amreshji as per sec 40A(3) payment for expenditure in a day to a party shall not exceed rs 20000 otherwise expence is dissallowed under this section. There some special cases mention in rule 6dd where exemption is provided. As per your query you can make payment up to rs 20000 to same labour contractor in a day. Make sure the compliance of sec 194C else expence will be disallowed u/s 40(a)(ia)

VINOD KOTHAWALE (Accountant) (21 Points)
Replied 31 October 2014

20000 is for a single day transaction payment to any individual, not for whole year.

Read more at: /forum/maximum-cash-payment-in-a-year-310147.asp#.VFNamDSUdA0

Ravi Chandra R (Analyst) (34 Points)
Replied 31 October 2014

Even though cash payment should not exceed more than 20000 in a year for that person. Under 94c tds is applicable for contract if single payment exceeds 20000 or 75000 in a year.