Go Ad-Free on CAclubindia with Daily Mobile Updates. Subscribe Now!

Fixed deposit above 20000

RAJ KUMAR (FINANCE MANAGER) (1393 Points)

25 January 2014

HELLO FRIENDS, CAN ANYBODY OPEN AN FD OF RS. 1,00,000 IN CASH OR IT SHOULD BE FROM BANK A/C.

I THINK RS. 20,000 PROVISION NOT APPLICABLE TO FD.

PLS. REPLY.

THANKS.

Reply
Follow
Share

6 Replies

(Guest)

Most banks insist on opening a savings bank account befor opening a FD a/c. They might also ask for introduction from a customer if you are directly opening an account. Some banks don't insist on that now. You will have to provise ID proof, photographs, address proof etc.

Every depositor while opening a Fixed Deposit Account by tendering cash shall be required to furnish PAN/GIR Number or submit Form 60/61 if the deposit amount exceed Rs.50,000/-. By fufilling the banks conditions you can open the Fd a/c in cash.(Rs 20000/- limit for Fd.. not heard of)

Upgrade to CAclubindia Pro. Subscribe Now!

(Guest)

Yes since limit is applicable for expenses.

SamTK (Chartered Accountant) (194 Points)
Replied 26 January 2014

40A(3) is not applicable to payments made to Banking Companies(Scheduled Commercial Banks). But, 40A(3) is not applicable on investments, only revenue expenditure.

And making a fixed deposit is not an expenditure, Manish. It is an investment, hence even if the payment was not being made to a Bank, 40A(3) would not have been attracted. 40A(3) is only attracted in the case of a revenue expenditure.

Stranger (.) (5531 Points)
Replied 27 January 2014

Originally posted by : Madhavi Pandit
	Most banks insist on opening a savings bank account befor opening a FD a/c. They might also ask for introduction from a customer if you are directly opening an account. Some banks don't insist on that now. You will have to provise ID proof, photographs, address proof etc. Every depositor while opening a Fixed Deposit Account by tendering cash shall be required to furnish PAN/GIR Number or submit Form 60/61 if the deposit amount exceed Rs.50,000/-. By fufilling the banks conditions you can open the Fd a/c in cash.

Moreover, Section-40A(3) of IT Act, 1961 applies when an assessee incurs revenue expenditure exceeding Rs.20,000/- otherwise than by an account payee cheque or an account payee demand draft, deductible u/h "PGBP", subject to exceptionsas per Rule 6DD which includes payment to banking & other credit institutions. Since opening an FD is an investment expenditure, sec-40A(3) not applicable in this case.

Mihir (Wealth Manager) (5293 Points)
Replied 27 January 2014

Cash FD of a large sum might invoke section 69.

Upgrade to CAclubindia Pro. Subscribe Now!

(Guest)

Yes, if the FD made is not disclosed in the books of accounts, Section 69 might apply.

Section 69

“Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.”

Addition will be made to the income of the assessee and the AO may initiate the penalty under section 271(1)(c) either for concealment of particulars of income or for furnishing inaccurate particulars of income depending on the nature of addition made by him.