you can make payment of above 20,000 to any govt dept..i still have doubt regarding Mr. Tharish choudhary answer i guess you cant pay more than 20,000 for single bill ... like when auditing for okaya power ltd.
there were two payments on single day one 24000 and other 4000 for another bill.. but we only disallowed payment of 24000.. as per my seniors guideline
anyone plz clarify my seond point whether 4000 will also be disallowed
Sec.40A (3) talks about “Where the assessee incurs any expenditure in respect of which……………………………..”. It means Sec40A (3) is applicable in respect of an “expenditure” which is in excess of Rs.20000/-. Expenditure is said to be incurred when a bill to that effect is accounted for. Hence when both the amount of bill and the amount of payment in respect thereof exceeds Rs.20000/-, provisions of Sec 40A(3) are applicable, otherwise not. Aggregate of payments made to a person in a day refers to payment of the same bill which exceeds Rs.20000/-. Because of the amendment, from Asstt Year 2009-10, you can not make the payment in cashmore than one time in a day for the same bill if it exceeds Rs.20000/- in aggregate in a day.
Is there is any change in the limit of cash payment in excess of Rs. 20,000/- at a time ? Can a amount in excess of Rs. 20,000/- can be paid in a day/at a time. Pl.clarify.
Don't get confused read further
Sec. 40A(3) of INCOME TAX ACT 1961 says any expenditure in excess of Rs. 20000 shall be disallowed if it is paid by any mode other than an A/c payee cheque or Bank draft.
However, Rule 6DD of Income Tax Rules provides the following EXCEPTIONS -
1. Amount payable to Government
2. Amount payable to Government Authorities and RBI
3. Any amount payable in a place where there is no BANK
4. Amount payable in case of purchase of Cpital Goods (CBDT Circular)
5. Amount payable in case of purchase of goods made under Cottage Industry
6. Amount payable to person involved in Hoticulture or Nursery
7. Amount payable to an employee from superannuation fund if his salary does not exceed fro 7000 p.a.
Further , if you pay an amount exceeding Rs.20000 in one day but in more than one time (say 15000 in one time and 12000 anothet time) then it is not covered under Sec. 40A(3)
Now from tax planning angel you can think of paying sigle bill in two times by saying to your seller (or other person to whom you have to pay) for making two bills for a single trasaction in the name of same person
There is one more way, where you can get made two bills for a single transaction exceeding Rs. 20000 in the name of two persons of your family
I would like to answer to ankur's query.Before the amendment made in Budget 2008 if say, a person wanted to pay Rs.36000 to Mr.X then he would Split the amount say 18000 & 18000 and make two payments (can be on the same day ) and escape from 40A(3).Now after the amendment the law states that :where the assessee incurs any expenditure in respect of which A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, otherweise than A/c payee cheque..bla bla bla...exceeds Rs.20000, no deduction shall be allowed in respect of such expenditure.
So Ankur could disallow Rs.24000 only earlier but as of now he should disallow both 24000 & 4000 as these were made to a single person on a single day.Hope things are clear.I conclude by making one request to Mr.Ankur that please maintain client confidentiality.
if i made a payment of more than 20,000 for Mr.x in full year on various dates, it is applicable or not?
The matter of question is whether at a single time cash exceeding Rs. 20000/- can be paid to a single person or not. In whole year you can make any number of payments but each cash payment (in a single day) should not exceed Rs. 20000/-. You for instance pay cash to Mr. X Rs. 20000/- on 24th Feb. then on next day pay again Rs. 20000/-, this section will not apply. Is this clear.