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whether online money transfer covered u/s 40 A(3)

Indudhar (Tax Advocate) (427 Points)

23 April 2009

Friends, according to Sec 40 A(3), any payment in exceeding of Rs 20000/- should be made by crossed cheque or Demand Draft.. My query is that whether online money transfer is covered under this section or not. please clarify me regarding this with citations & notification.. Thanks in advance

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10 Replies

CA CS CIMA Prakash Somani (Landmark Group) (23502 Points)
Replied 23 April 2009

I am not sure but i think online money transfer should be covered in this section as this is none other then making payment other than by cash and that also in particuler account.

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CA CS CIMA Prakash Somani (Landmark Group) (23502 Points)
Replied 23 April 2009

Further i am also getting salary more then Rs 20000 which directly credit to my account and there is no disalowance.

CA CS CIMA Prakash Somani (Landmark Group) (23502 Points)
Replied 23 April 2009

Here are amendmend made in 2007:

Payments made by a credit card, a debit card and use of an electronic clearance system (ECS) through a bank account would now fall outside the scope of expenditure disallowance by the taxman even if the amount involved exceeded Rs 20,000.

vijay (.) (212 Points)
Replied 27 April 2009

Dear INDUDHAR,

It will not be disallowed.

Regards

Vijay Kumar

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CA RAMESH KUMAR AHUJA (CA, DISA, LLB) (5452 Points)
Replied 28 April 2009

The intention of the law is that the payment should be through a crossed instrument so that the proceeds are paid in the account of a payee. On line transfer also ensures that the payment is made in the account of the payee itself and the basic objective of law is met this way. Hence, the online payment, in my opinion, is not disallowable u/s 40A(3).

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CA. Megha Topiwala (Job) (1534 Points)
Replied 14 May 2009

Online payment is allowed as expense.... as it is not paid by cash (hard cash)... hence not covered by sec 40A (3)...

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santhosh (Student) (1174 Points)
Replied 24 October 2009

i think, since because of transfer is made thru bank it will not get disallowed...... but one doubt is that non crossed cheque is also transfer thru bank account.... is there any similarity in between these two....