Payment of wages in cash

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This query is : Resolved

Udaya Kishore (Querist)

11 June 2020 A business man is booking huge amount of wages paid in cash. He is not able to produce any proof such as name of the payee, identification, designation etc to convince the auditor even though the amount is paid in cash and it is more than Rs.10000 per person.Whether the auditor has to report the same in Tax Audit report as it attracts Sec 40(A) (3) or accept the argument of the party that it is a general practice to pay wages in cash.Is there any method to verify such payments.Auditor is advising the party to deposit the wages in their bank accounts and make arrangement to collect cheques from the workers and draw the amount to pay them in cash as the workers are insisting on cash payment only.Total workers are nearly 100.Whether the ITO accepts this argument of the party.What kind of remarks the auditor has to make in 3CD in this situation.Please advice and suggest suitable method for reporting

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

11 June 2020 Ask them to pay wages daily/ weekly in cash not exceeding 10,000 to each person then it will not be a problem no need of reporting in such a case.
Any payment to a person payment in a day should not exceed 10,000. Any violation of this rule has to be reported in 3CD.
Signed vouchers are required for such payment for verification during tax audit.

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