Regarding salary payment in cash

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Suresh S. Tejwani (Querist)
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29 November 2025 If we give cash salary to the person above 30,000 for particular month and PF ESI is not deducted then we can prove the salary expense?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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29 November 2025 Section 40A(3) of the Income Tax Act disallows deductions for business expenses, including salaries, paid in cash exceeding ₹10,000 to a single person in one day unless made via account payee cheque, bank draft, or electronic modes. Cash salary payments above this limit cannot be claimed as deductible expenses during tax computation, regardless of PF or ESI status. Exceptions exist for payments up to ₹50,000 in employee terminal benefits or in banking-unserved areas, but standard monthly salaries do not qualify.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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29 November 2025 Not deducting PF (mandatory for wages up to ₹15,000 unless exempted) or ESI (for wages up to ₹21,000) does not validate cash payments; it may instead raise compliance red flags. Self-made vouchers or affidavits rarely suffice as proof without bank trails, and tax authorities often disallow such claims due to unverifiable nature.

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