Limit for cash payment of salary
This query is : Resolved
Sanjay Budhiraja
(Querist)
30 April 2026
Hello all
Pl guide me how much salary we can give to employees in cash during the year as per new provision of income tax u/s 40A(3).
If our company has given salary of 1 Employee for ₹234000/ pa.. per month 19500/ in 2 different days. Is it allowed or disallowed in last FY. ANY PANELTY OR ....
Pl reply
Regards
Sanjay
Pl guide me how much salary we can give to employees in cash during the year as per new provision of income tax u/s 40A(3).
If our company has given salary of 1 Employee for ₹234000/ pa.. per month 19500/ in 2 different days. Is it allowed or disallowed in last FY. ANY PANELTY OR ....
Pl reply
Regards
Sanjay
30 April 2026
Cash salary is not banned, but Section 40A(3) restricts deduction where payment or aggregate cash payments to a person exceed ₹10,000 in a single day, unless covered by Rule 6DD exceptions.
Therefore, if salary of ₹19,500 is paid to one employee in cash on one day, the amount may be disallowed under Section 40A(3). If it is paid on two different days and cash payment on each day does not exceed ₹10,000, then technically the per-day limit may not be crossed, but artificial splitting merely to avoid Section 40A(3) is not advisable.
Safer practice is to pay salary through bank transfer/account-payee cheque/UPI etc. and maintain salary register, attendance, appointment/payment records and employee acknowledgement.
Therefore, if salary of ₹19,500 is paid to one employee in cash on one day, the amount may be disallowed under Section 40A(3). If it is paid on two different days and cash payment on each day does not exceed ₹10,000, then technically the per-day limit may not be crossed, but artificial splitting merely to avoid Section 40A(3) is not advisable.
Safer practice is to pay salary through bank transfer/account-payee cheque/UPI etc. and maintain salary register, attendance, appointment/payment records and employee acknowledgement.
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