Cash payment limit (Students)

This query is : Resolved

C. JHANSI

( Author )
05 July 2012

Whether the cash payment limit related to only expenses or cash deposit also.
Please help on this query.

C.A Anshul Singhal

( Expert )
05 July 2012

cash payment limit only relate to expenses.
cash payment limit for particular expenses is rs 20000 in a particular day.

C. JHANSI

( Author )
05 July 2012

Is this cash payment limit is for single transaction per day or total transactions in a day?

C.A Anshul Singhal

( Expert )
05 July 2012

Disallowance u/s. 40A( 3) is applicable for each payment and not for the aggregate of the various payments made to same party during one day: The Assessee’s plea against the disallowance u/s. 40A(3) was that each payment was below, Rs.20,000/-, and, therefore, Sec. 40A(3) is not applicable. However, as per the A.O., since the payment of one day exceeded Rs. 20,000/-, therefore, Sec. 40A( 3) was applicable.

C.A Anshul Singhal

( Expert )
05 July 2012

Example- TWO BILL RAISED ON 04/06/12
FIRST RS---------RS40000
SECOND------------RS25000
PAYMENT ON 06/06/12 RS 15000 AGAINST FIRST BILL
RS 18000 AGAINST SECOND BILL TO SAME PARTY.
BOTH ARE ALLOWED.

Siddhartha Bhardwaj

( Expert )
05 July 2012

Section 40A(3) reads as under:

"Where the assessee incurs any expenditure in respect of which a payment or AGGREGATE of payments made to a person in A DAY ........"

As is clear from the above wordings that if an assessee makes multiple payments to a person in ONE SINGLE DAY otherwise than by an account payee cheque AND the AGGREGATE of such payments exceeds Rs. 20,000 the expense shall be DISALLOWED.