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RTGS

priya (Audit assisstant) (37 Points)

06 June 2010

I need to know the treatment of RTGS payment regarding 44AB cases. Will it be disallowed u/s 40A3 since it s not a bank draft or a cheque.If not can anyone tell me where such corresponadance is found.has it been found in the budget

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11 Replies

SIVASIVA (FCA, Future CA) (4935 Points)
Replied 06 June 2010

it will not be disallowed as the same is APPROVED by bank.

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Venkateswara Rao Sapare (Accountant) (1500 Points)
Replied 07 June 2010

Dear Friend,

Will it ( R.T.G.S) be disallowed u/s 40A3 since it s not a bank draft or a cheque?

Answer to this question is simple that it is “ALLOWED” as it is equivalent to BANK TRANSACTION.

Explanation

Section 40A(3) of the Income Tax Act, encourages accountability through this.

Accountability is expected in every expenditure by an assessee, in respect of which payment in excess of Rs.20,000 is made otherwise than by an account payee cheque or an account payee bank draft. Here Rule 6DD prescribed, “the cases and circumstances in which payment in excess of Rs.20,000/- may be made otherwise than the way stated earlier”.

Rule DD( c ) says “Payment through banking system”. It is clear that this exceptional circumstance is allowed. In the course of technological developments, this RTGS and NEFT are evolved better facilitating fund transfer mechanism.

You need not go for any specific written evidence anywhere, even to that extent Budget, as the Income Tax Act itself is very clear enough in above words “Payment through banking system”.

1 Like

DT Fundas - Tarun rustagi ( Author) (1150 Points)
Replied 07 June 2010

yes it is allowed read rule 6 with sec.40a(3)

Neha (Article) (118 Points)
Replied 07 June 2010

Dear friend..

Wud u plz tel me wat is NEFT transaction?

CA.G.Muguntha Narayanan (Internal Auditor at TVS Motors) (2195 Points)
Replied 07 June 2010

Payment through RTGS is an allowable exp. only. All the points have been rightly quoted by Mr.Venkateshwara Rao.

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Aneesh (Pursuing CA) (101 Points)
Replied 07 June 2010

An RTGS or an NEFT is a bank transaction and so the question of it being disallowed does not arise.

Aneesh (Pursuing CA) (101 Points)
Replied 07 June 2010

An NEFT (National Electronic Fund Transfer) is nothing but a transfer of Funds. It allows individuals/companies/firms to electronically transfer funds from any bank branch to any other bank branch all over the country.

kamlesh (i) (35 Points)
Replied 07 June 2010

Real Time Gross Settlement (RTGS)is supposed to be the faster one as it is done in real time.

In RTGS, the beneficiary bank has to credit the the beneficiary's account within two hours of receiving the funds transfer message.

National Electronic Funds Transfer (NEFT) is done on net basis.

This means bank club transactions together and only the net amount is transfered. This settlement is done 6 times per day on weekdays and 3 times on Saturdays.

NEFT is slightly slower compared to RTGS.

However, RTGS is only for transactions above Rs 1 lac.

If your transaction is for less than Rs 1 lac, you have to use NEFT.