40A(3) & 194C

Payment of more then 20000 rs.in one day not allowed even if the bills were of different dates to the same party.

TDS is to be deducted if any one bill is of above 20000 rs. or total yearly bills exceeds above rs. 50000.

Excuse me I differ with the opnion of Mr.sharma.It is not so .If there are 2 different bills of lower amt then 20000 and aggregate of the payment in cash exceeds 20000 to the same person in a day for these 2 different bills will not attract provisions of sec 40A(3).for eg. Mr A received 2 bills from his supplier, 1 for Rs 18000 & other for Rs 19500  and now Mr A makes the payment to his supplier in cash for both of these bills together then even though cash payment to one person at a time exceeds Rs 20000 it will not be dissallowed.

Hi Dhruv,

we will treat each invoice as seperate transaction, so even though aggregate payment exceeds Rs. 20,000 but still will be allowed as the limit is tested transaction wise & not otherwise. So I agree with Mr.Pankaj.

As For TDS it shall be deducted if one of the bill exceeds Rs. 20,000 or total annual payment exceeds Rs. 50,000. so in this case you don't have to deduct TDS. So I agree with Mr. Sourabh.

 i still have no clear cut answer on my Tds query !!

 Yes you have to deduct TDS. 194 C will attract if single payment exceeds Rs.20000 or annual payment exceeds 50000

Ref: para 159.3 page A303 Direct taxes ready reckoner, Dr VK Singhania, Taxmann publications, AY 2008-09 &2009-10

 I agree wid Mr. Sourabh completely........ the recent amendments have brought about this kind of treatment.

yes if the aggregate payment for two or more bills is paid on a single day in cash and if such amount is more than Rs.20 K then it is disallowed.

in my openion sec 40A(3) Will not be applicable as one bill does not exceed more than rs 20000

but TDS wll be liable because either payment or credit should be more than rs 20000

here payment is more than 20000 rs

Dont confuse with the word bill.

why all are geting confused.

You should consider the payment amount for expense during a day to a single person.

If payment exceeds Rs.20000 in cash then the entire amount will be disallowed.

What Mr.saurabh has posted is absolutely right.

tds and sec 40A(3) are seperate provisions, if bill amount and payment amount is more than 20000 than expenditure will be disallowed and tds need to be deducted if provisions are satisfied n if tds is not deducted than exp. will be disallowed.

here as bills amount are less than 20000 it will not be disallowed.

sec 40A(3) provides dt where the payment or aggregate of payments to a single person, otherwise than by account payee cheque/draft  exceeds rs. 20000 , 100% of such expenditure shall be disallowed.

now, we must not be confused as EACH bill not exceeds rs. 20000. i.e.. the amount of each individual bill does not attract the provision of sec 40A(3) as it is less than rs. 20,000. THOUGH THE AMOUNT OF PAYMENT EXCEEDS RS. 20,000 , NOTHING SHALL BE DISALLOWEDOUT OF RS. 32000.

 TDS U/S 194C SHALLBE DUDCTIABLE ONLY IF THE AMOUNT OF INDIVIDUAL PAYMENT EXCEEDS RS.20000 OR THE AGGREGATE OF PAYMENTS EXCEEDS RS 50000 IN  ANY FINANCIAL YEAR.. THE SAID QUERRY DOESN'T CONTAIN ANY OF THE CONDITIONS. HENCE, TDS NOT TO BE DEDUCTED.