Expenditure in excess of Rs.20,000 paid in aggregate during a day to be disallowed [Sec. 40A(3)]. My question is it fully disallowed or to the extent of 20%.
I know it is fully disallowd but just to make sure.
15 Replies
Krutesh Patel
(ACA)
(727 Points)
Replied 24 October 2009
With effect from Assessment year 2009-10, the disallowance will be made 100%
Deeps
(Article Assisstant)
(2485 Points)
Replied 24 October 2009
It is fully disallowed. however in the below cases it is allowed
Rule 6DD of the Income-tax Rules permits certain categories of payments under certain
circumstances otherwise than by crossed cheque or draft. Accordingly, the provision of section 40A(3) do not apply to the cases and circumstances which are specified below—
(a) Payments which are made to the Reserve Bank of India, State Bank of India or other
banking institutions including co-operative banks and land mortgage banks, primary
credit societies, Life Insurance Corporation of India, Unit Trust of India and certain
specified institutions providing industrial finance.
(b) Payments which, under contracts entered into before 1-4-1969, have to be made only in
cash.
(c) Payments made to the Central or State Government which, under the Rules framed by
the Government, are required to be made in legal tender.
(d) Payments in villages and towns having no banking facilities to persons ordinarily residing
or carrying on business or profession in such villages or towns.
(e) Payments by way of book adjustments by the assessee in the account of the payee
against moneys due to the taxpayer for any goods supplied or services rendered by him
to the payee.
(f) Payments made by —
(i) any letter of credit arrangements through a bank;
(ii) a mail or telegraphic transfer through a bank;
(iii) a book adjustment from any account in a bank to any other account in that or any
other bank; and
(iv) a bill of exchange made payable only to a bank.
(g) Payments of terminal benefits such as gratuity, retrenchment compensation etc., to lowpaid employees (i.e., those whose annual salary does not exceed Rs. 7,500) or to the
members of their families.
(h) Payments made to cultivators, growers or producers for the purchase of agricultural or
forest produce, animal husbandry products including hides and skins, products of dairy or
poultry farming, products of horticulture, or apiculture or products of any cottage industry
run without the aid of power. The expression ‘the produce of animal husbandry’ includes
livestock and meat. Therefore, in a case where payment exceeding Rs.20,000 is made to
a producer of the products of animal husbandry (including livestock, meat, hides and
skins) otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft
for the purchase of such produce, no disallowance should be attracted under section
40A(3) read with rule 6DD.
However, this benefit will not be available on the payment for the purchase of livestock,
meat, hides and skins from a person who is not proved to be the producer of these goods and
is only a trader, broker or any other middleman, by whatever name called.
(i) 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 section 192 of
the Income-tax Act, 1961, and when such employee—
A. is temporarily posted for a continuous period of fifteen days or more in a place other
than his normal place of duty or on a ship; and
B. does not maintain any account in any bank at such place or ship;
(j) Where the payment was required to be made on a day on which the banks were closed
either on account of holiday or strike;
(k) Where the payment is made by any person to his agent who is required to make payment
in cash for goods or services on behalf of such person.
(l) Where the payment is made by an authorised dealer or a money changer against
purchase of foreign currency or traveller's cheques in the normal course of his business.
CA Suri Kota
(Assistant Manager @ EY)
(955 Points)
Replied 24 October 2009
Its fully disallowed............
E.K.Raghavendra
(Practicing Chartered Accountant)
(134 Points)
Replied 24 October 2009
From A.Y. 2008-09 onwards its fully disallowed.......
Nitin Grover
(CS)
(1228 Points)
Replied 24 October 2009
Hi Dear Friendsss
its fully disallowed but there was some planning like if u r giving these amounts in part like Rs. 20000/voucher is allowed because a payment in a time should not exceed Rs. 20,000 but now there is ammendment now u cant pay or in numbers of payments in a day exceed of Rs. 20,000. If u give then is disallowed
Thanks
Nitin Grovr
Sunil
(Trader)
(2611 Points)
Replied 24 October 2009
Exception is payment to transporter. It is allowed upto Rs.35,000 only for payment to transporter. All others are upto 20000. this is for th currnt financial year. However, for your exams you rfer to the provisions as per the financial year applicable for your exams.
Nitin Grover
(CS)
(1228 Points)
Replied 24 October 2009
ya its 100% but sme ammendment is there which i have written earlier
Bonita
(trainee)
(218 Points)
Replied 24 October 2009
fully disallowed.but subject to the exceptions..of certain payments
FATEMA
(CHARTERED ACCOUNTANT)
(719 Points)
Replied 27 October 2009
if an assessee incurs any expenditure in respect of which payment in excess of Rs. 20,000 is made otherwise than by an account payee cheque, 100% of that expenditure will be disallowed.
Rule 6DD prescribes certain exceptional cases where payment exceeding Rs.20,00 not made by an account payee cheque is allowed.
With effect from October 1,2009, the monetary limit of Rs. 20,000 has been raised to Rs. 35,000 in the case of payment made for plying, hiring or leasing goods carriages. For other payments, the limit still continues to be Rs. 20,000
Nitin Grover
(CS)
(1228 Points)
Replied 27 October 2009
HI
ya u r right but there is one more ammendment which i have wrote earlier
Nitin
Recent Topics
- Form 3CEAB
- Form 3CEAA and Form 3CEAB
- DIR 3 Web KYC
- Can i declare LTCG income as business income if I
- Stock entry in new software
- I have an EMI collection shop, what is its SAC cod
- Making payment once in quarter possible under QRMP
- Master File Documentation related
- Applicability of 44AD needs clarification
- ITC reversal in GST 3B
Related Threads
CAclubindia
