Cash payment and bank transaction

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Querist : Anonymous

Querist : Anonymous (Querist)

17 November 2014 Respected experts

I am a tax payer . I run a coaching . But i dont deposit my money in my bank account .

Now my question is ...

1) Is it really necessary to deposit or keep money in bank , if i am a tax payer ?

2) I purchased 20 chairs in cash . I payed 40000 cash . since i dont use my bank account to make an transaction , will it make any issue ?

Somebody told me , i want to pay someone above 20000 , i should use bank account . is it really necessary ?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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17 November 2014 1. no. it is not necessary to deposit the money in the bank account

2. while purchasing chairs in cash is ok. but if you do any non-capital expenditure in cash in excess of Rs 20000 at a time, it will be disallowed.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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Querist : Anonymous

Querist : Anonymous (Querist)

17 November 2014 ok sir . thank you very much .

Sir , if i pay in cash to some one and i buy some goods from that person to sell that goods to make an profit and for that i pay 2 lacs in cash , will be allowed ?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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17 November 2014 if the expense made in cash is in excess of Rs 20000, it will be disallowed.

Querist : Anonymous

Querist : Anonymous (Querist)

17 November 2014 Nikhil Sir , please tell me , where i did the mistake in whole process..

1) i made an agreement to purchase goods with some one and for that i paid him cash 2 lacs .

2) I used that goods A to sell in market

3) I earned profit after selling that goods

4) I filed ITR , where i showed my profit = sell price - cost price .

Nikhil Kaushik

Nikhil Kaushik (Expert)
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17 November 2014 step 1. the purchase will be disallowed.

Querist : Anonymous

Querist : Anonymous (Querist)

17 November 2014 If i pay him 2 lacs cash in 10 installment within one month then will it be allowed ?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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17 November 2014 yes....if it pertains to a single purchase...

Querist : Anonymous

Querist : Anonymous (Querist)

17 November 2014 so where will i have to change legally in my contract agreement...

Since i have make an agreement with that person ... i will have to again make an agreement where i will have to mention that i will pay you 2 lacs in 10 installment within one months .

Will it be ok ?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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17 November 2014 you better make the payment in cheque..

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