16 September 2010
Amounts not deductible in respect of expenditure exceeding Rs. 20,000† [Sec. 40A(3)] - If an assessee incurs any expenditure in respect of which payment in excess of Rs. 20,000 is made otherwise than by a crossed cheque or crossed bank draft, 20 per cent of such expenditure will be disallowed as expenditure. Rule 6DD, however, prescribes the cases and circumstances in which payment in excess of Rs. 20,000 may be made otherwise than by a crossed cheque or crossed bank draft without attracting the disallowance. Even payment made for purchase of goods falls within the expression “expenditure” occurring in this section.
16 September 2010
I differ with Mr Verma in this regard.
In fact as per S.40A(3), where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be Allowed in respect of such expenditure, except in the circumstances specified in the section as specific exceptions.
So please note that there will be 100% disallowance and not just 20%.
16 September 2010
Respected MR. SINHA JI & ARORA JI,
The Government explained this amendment as follows:- Amendment to the provisions of section 40A (3) of the Income-tax Act, Section 40A (3)(a) of the Income-tax Act, 1961 provides that any expenditure incurred in respect of which payment is made in a sum exceeding Rs.20,000 /- otherwise than by an account payee cheque drawn on a bank or by an account payee bank draft, shall not be allowed as a deduction. Section 40A (3)(b) also provides for deeming a payment as profits and gains of business or profession if the expenditure is incurred in a particular year but the payment is made in any subsequent year in a sum exceeding Rs. 20,000/- otherwise than by an account payee cheque or by an account payee bank draft. However, the provisions of this section are subject to exceptions as provided in Rule 6DD of the Income-tax Rules, 1962.
28 March 2019
if the payment is made in cash for less than 10,000 in different day in respect of single purchase, section 40(a)(3) shall be applicable ? please clarify.
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