Salary payment
This query is : Resolved
harshit darji
(Querist)
20 June 2015
dear all the experts solve it
as per sec40a(3) any payment exceeding 20000rs is not allowable.
but sir have paid 30000 salary in cash p.m to my employee so can i paid 30000 by two installment of cash payment says 15000.p.m
as per sec40a(3) any payment exceeding 20000rs is not allowable.
but sir have paid 30000 salary in cash p.m to my employee so can i paid 30000 by two installment of cash payment says 15000.p.m
JUGAL PATEL
(Expert)
20 June 2015
NO Section 40A(3) will not apply in above case
harshit darji
(Querist)
20 June 2015
so which section will apply sir??
and give me the solution for this..how can i treat this transaction for allowable exp
and give me the solution for this..how can i treat this transaction for allowable exp
22 July 2025
Great question! Here’s a clear explanation:
---
### Section 40A(3) & Salary Payment in Cash:
* **Section 40A(3)** disallows expenditure if the payment exceeds ₹20,000 in cash **to a single person in a single day**.
* But **salary payment** is **excluded** from the purview of Section 40A(3).
---
### Relevant Rule for Salary Payment:
* **Salary can be paid in cash irrespective of the amount.**
* Section 40A(3) does **NOT** apply to salary payments made in cash to employees.
* So, paying ₹30,000 salary in cash per month to an employee is **allowed** as a business expense.
---
### Can you split the payment?
* You **can pay salary in installments**, like ₹15,000 twice a month, but it’s not necessary to avoid Section 40A(3) because salary payments are exempt from that rule.
---
### Summary:
| Payment Type | Section 40A(3) Applicability | Allowable Expense? |
| ----------------------------- | ---------------------------- | ------------------------------------------- |
| Salary paid in cash | No | Yes, fully allowable |
| Other payments > ₹20,000 cash | Yes | Disallowed unless made by cheque/other mode |
---
### So:
* You **do not need to split salary payments** to avoid disallowance.
* Just ensure you keep proper salary records and comply with other labor laws.
---
If you want, I can help draft a simple note or explanation for your company’s accounting team. Need that?
---
### Section 40A(3) & Salary Payment in Cash:
* **Section 40A(3)** disallows expenditure if the payment exceeds ₹20,000 in cash **to a single person in a single day**.
* But **salary payment** is **excluded** from the purview of Section 40A(3).
---
### Relevant Rule for Salary Payment:
* **Salary can be paid in cash irrespective of the amount.**
* Section 40A(3) does **NOT** apply to salary payments made in cash to employees.
* So, paying ₹30,000 salary in cash per month to an employee is **allowed** as a business expense.
---
### Can you split the payment?
* You **can pay salary in installments**, like ₹15,000 twice a month, but it’s not necessary to avoid Section 40A(3) because salary payments are exempt from that rule.
---
### Summary:
| Payment Type | Section 40A(3) Applicability | Allowable Expense? |
| ----------------------------- | ---------------------------- | ------------------------------------------- |
| Salary paid in cash | No | Yes, fully allowable |
| Other payments > ₹20,000 cash | Yes | Disallowed unless made by cheque/other mode |
---
### So:
* You **do not need to split salary payments** to avoid disallowance.
* Just ensure you keep proper salary records and comply with other labor laws.
---
If you want, I can help draft a simple note or explanation for your company’s accounting team. Need that?
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