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Discussion > Income Tax > Tax queries >

Section 40 A (3)(a) and rule 6DD

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Management Consultant


[ Scorecard : 104]
Posted On 09 April 2011 at 18:12 Report Abuse

HI,

DOES REIMBURSEMENT TO AN EMPLOYEE FOR IMPREST EXPENSES BY CASH EXCEEDING 20000 ALLOWED????

SINCE IN RELEVANT SECTION AND SUBSEQUENT RULE NO SUCH ALLOWANCE IS MENTIONED OR EXPLAINED. 

HERE, IMPREST IS OF

A.  SUCH NATURE WHERE AN EMPLOYEE COLLECTS MONEY FROM THE COMPANY AND DISTRIBUTES THE SAME TO OTHER WORKERS

AND

B. HE CLAIMS FOR REIMBURSEMENT TOWARDS PETTY EXPENSES INCURRED DURING A PERIOD OF TIME

 

PAYMENTS ON BOTH CASES EXCEED 20000 IN A DAY????

THANK YOU


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SIVASIVA
FCA, Future CA


[ Scorecard : 4903]
Posted On 09 April 2011 at 18:36

payment more than Rs.20000 to one person is only disallowed.





U S Sharma
glidor@gmail.com


[ Scorecard : 19410]
Posted On 09 April 2011 at 18:59

the person is petty cash holder for company, here company may fix a celing of max cash to be handled at one single time, no direct relation with incometax.




Joey Tribbiani
fdg


[ Scorecard : 1859]
Posted On 09 April 2011 at 19:16

Imprest given to an employee does not fall into category of expenses,its just the amount given to an employee to make payments for expenses. However if the employee expends more than20000 for an expenditure then it will be disallowed..




Chandresh Darji
Article Assistant


[ Scorecard : 24]
Posted On 11 April 2011 at 12:17

Reimbursement to employee for petty cash expenses is not expenses for company at all. So it will not be included inSec 40 A(3)(a) and rule 6DD.




Joydip Chaubey
CA-Final Student Former Article Assistant now Self Employed


[ Scorecard : 41]
Posted On 11 April 2011 at 15:48

A) Generally Amount paid by the company to the petty cashier for the petty cash expenditure for a given period.And such cash is utilised by the petty cashier for incurring different expenditure on different times during that period.the company does not book such petty cash payment exceeding 20000 to petty cashier as an expense.which can be booked by a company as follows:  

1) Petty Cash A/c ..............Dr     Rs. 21000/-

          To, Cash A/c                                       Rs. 21000/-

      (On a single day)

2) Expenses A/c..................Dr.       Rs. 7000/-

     Expenses A/c .................Dr.       Rs. 7000/-   

     Expenses A/c .................Dr        Rs. 7000/-

             To, Petty Cash A/c                             Rs. 21000/-

 (on different dates)

In the above case it has clarified that the expenditure incurred to a single person are not erxceeding more than 20000 in a single day inspite of the petty cash payment to the cashier is exceeding 20000. but where the expenditure incurred by the petty cashier is exceeding 20000 to a single person in a single day then it will come under the purview of Sec. 40A (3).

B) In the case of reimbursment of petty cash exp. to the petty cashier can be explained as follows:

1) Expenses A/c..................Dr.       Rs. 7000/-

     Expenses A/c .................Dr.       Rs. 7000/-   

     Expenses A/c .................Dr        Rs. 7000/-

             To, Petty Cashier A/c                             Rs. 21000/-

(On different dates)

2)  Petty Cashier A/c ......................Dr.            Rs. 21000/-

       To Cash A/c                                                              Rs. 21000/-

    or,

2)  Petty Cash A/c ........................Dr. 21000/-

        To Cash A/c                                            21000/-     &

     Petty Cashier A/c.....................Dr. 21000/-

         To Petty Cash A/c                              21000/-

In the above case also the exp. is not incurred in a single day to a single person. only the exp. is reimbursed on a single day as a whole.It will not attract sec 4 A (3).but if one particular exp. incurred is exceeding 20000 then it will attract sec 40 A (3).Hope I've clarified  your querry Binayak.




CA Shivang
Business Controller


[ Scorecard : 2971]
Posted On 11 April 2011 at 16:07

Imprest system is the the part of cash balance for the company.

Treat it as advance for various expense. So if more than 20k is given for single exp than it will be disallowed. Or else it wont be disallowed.




Joydip Chaubey
CA-Final Student Former Article Assistant now Self Employed


[ Scorecard : 41]
Posted On 11 April 2011 at 16:49

Yes Shivang Sir,I was trying to establish that point in my previous messg, what u have mentioned.Thank u sir.
 



Total thanks : 1 times



G.senthil kumar
Audit Assistant


[ Scorecard : 23]
Posted On 11 April 2011 at 23:09

Payment made to an employee for distributing money to other workers will be treated as a cash advance (which is an asset)  hence the same will not be disallowed u/s 40A(3).

Having said that , if the recipient employee  makes payment to other workers or incurs expenditture in a single day exceeding Rs. 20,000 the same will be disallowed u/s 40 A(3).

 

                                                   By

                                                          G.Senthil -CA Final Student




CA Shivang
Business Controller


[ Scorecard : 2971]
Posted On 11 April 2011 at 23:29

Mr. Senthil Kumar.

What does the act say? 20k in a day or 20k for a single expense.....?



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