Salary to partners
This query is : Resolved
02 May 2016
in a firm partners are receiving salary of Rs 30000 per month.
whether i have to give it through bank or cash ???????
whether i have to give it through bank or cash ???????
02 May 2016
To pay by a/c payee cheque or a/c payee bank draft ,otherwise disallowance u/s 40A(3) of the Income tax Act,1961 attracts.
02 May 2016
THE FIRM HAS NOT ISSUED CHEQUES WHAT TO DO???????
MAY I GIVE 15000 TWO TIMES PER MONTH??? AS SALARY
MAY I GIVE 15000 TWO TIMES PER MONTH??? AS SALARY
22 July 2025
Regarding salary payment to partners in cash:
* **Section 40A(3)** of the Income Tax Act says any payment exceeding ₹10,000 made in **cash** to a person (including partners) is **not allowed as a deduction** for the firm.
* Therefore, **salary paid to partners should be paid by account payee cheque, bank draft, or electronic transfer** to be allowable as a deduction.
---
### If the firm has not issued cheques:
* Payments made **fully in cash exceeding ₹10,000 will attract disallowance** under Section 40A(3).
* Splitting payment into two cash payments of ₹15,000 each **does not help**, because each payment exceeds ₹10,000.
* Even if you split it into smaller payments below ₹10,000, the total amount paid in cash to the same person during a day **cannot exceed ₹10,000** (Section 40A(3) read with Explanation).
---
### What to do?
* Start paying partners through **bank transfers or account payee cheques** for salary to avoid disallowance.
* If cash payments have already been made above ₹10,000, expect that portion to be disallowed under Section 40A(3).
* For compliance and audit purposes, maintain proper payment proofs (bank statements, cheque copies).
---
If you want, I can help you draft a simple salary payment procedure to comply with these rules. Would you like that?
* **Section 40A(3)** of the Income Tax Act says any payment exceeding ₹10,000 made in **cash** to a person (including partners) is **not allowed as a deduction** for the firm.
* Therefore, **salary paid to partners should be paid by account payee cheque, bank draft, or electronic transfer** to be allowable as a deduction.
---
### If the firm has not issued cheques:
* Payments made **fully in cash exceeding ₹10,000 will attract disallowance** under Section 40A(3).
* Splitting payment into two cash payments of ₹15,000 each **does not help**, because each payment exceeds ₹10,000.
* Even if you split it into smaller payments below ₹10,000, the total amount paid in cash to the same person during a day **cannot exceed ₹10,000** (Section 40A(3) read with Explanation).
---
### What to do?
* Start paying partners through **bank transfers or account payee cheques** for salary to avoid disallowance.
* If cash payments have already been made above ₹10,000, expect that portion to be disallowed under Section 40A(3).
* For compliance and audit purposes, maintain proper payment proofs (bank statements, cheque copies).
---
If you want, I can help you draft a simple salary payment procedure to comply with these rules. Would you like that?
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Showing Gift from relative in ITR for this year
- ITR selection for salaries and capital gain less than L
- Share accounting-->fifo - capital gain - period as per fifo?
- Soyabean hsn code and gst rate
- Treatment of Pension ?annuity returns on PMVY
- ITR filing- non tax audit cases- Asstt.Year 2026-2027
- Scrutiny assessments u/s 143(2) for AY 25-26
- Capital Gain on EUITY Shares
- GSTR-4 Annual Return ! Pending Returns for F.Y. 20-21 to 22-23
- NON- SUBMISSION OF LLP FORM 3
- Gst invoice numbering and delivery challan numbering
- Standard Deduction claim for EPFO Pension and ICICI Prudential Life Annuity
- Small dealers gst returns filing
- Sales amount in Gstr1
- CG after sale of flat
- E Commerce GSTR1 & 3B how to file
- GST Cancellation without jurisdiction
- Legal Opinion on Registrar's Refusal to Investigate a Society for Non-Renewal and Non-Compliance
- GST Refund_RFD-01
- Form10BD was uploaded successfully without any Error but after 24 hours, Form10BE are not available
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
