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Cash Expense Limit

Sushmita Saha (Accounts Coordinator) (66 Points)

12 November 2010

The maximum cash expense limit for 1 single transaction for is Rs. 20000/-. Has there been any revision? Can you also tell me whether it is possible to give an advance of Rs. 50000/- to a staff in cash vide a single transaction?

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18 Replies

sudhakar ca cwa (service) (1518 Points)
Replied 12 November 2010

in my opinion u can give staff advance of Rs.50,000.

But make sure he will not give it to single party or for single exp in a single day.

Other views also invited

1 Like

Ratti Wahal (Company Secretary) (139 Points)
Replied 12 November 2010

Dear Ms. Saha,

As far as my knowledge is concerned there is no revision in the limit being set for the cash transaction.

Further, payment to the employees generally made through the bank account including salary, bonus, advances etc. You can make payment through that medium as well.

Furthermore, you can make payment to the concerned employee as advance of Rs. 50,000/-.

Regards,

Amit Gupta (Loosening Myself) (1508 Points)
Replied 12 November 2010

Sec40A(3) speaks abt disallowance of expenses..n advance is nt a exp

(Guest)

Originally posted by : sudhakar ca cwa
	in my opinion u can give staff advance of Rs.50,000. But make sure he will not give it to single party or for single exp in a single day. Other views also invited

ya agree with sudhakar

Advance account is not a expenses

you can cash payment of expenses only rs.20000 in a day

srikanth (Accountant) (611 Points)
Replied 12 November 2010

Disallowances will attract only if it is a expensed in P&L A/c... U can plan on B/s items

Manoj Khandelwal (Practice) (347 Points)
Replied 12 November 2010

I agree with Sudhakar.

(Guest)

If we pay advance through cash for Rs.20,000/- or more then later on if we pass a journal entry transferred the same to expense a/c (i.e. Salary A/c ..Dr, Salary Advance CR... RS.50,000/-), is the salary expense allowed?

Shiv Nath kapoor (Student) (29 Points)
Replied 12 November 2010

It depends nature of payment made to employee. If it's capital payment, like loan then No disallowance and if it's not capital payment then it is considered as expense and same will be disallowed 40A(3).

Narayanan (Chartered Accountant) (189 Points)
Replied 12 November 2010

Acc to rule 6DD, terminal payments (gratuity, VRS, etc.) paid to employee upto Rs. 50,000 can be paid other than by way of a/c payee cheque, and still be allowed...

Shobhit (Associate) (75 Points)
Replied 12 November 2010

Advance being not an expense will have no treatment on payment as P&L is not affected, therefore no question of allowance or disallowance.

But subsequently wen expenses are booked against such advance, u hav to see allowance in accordance with Sec 40A(3) and accordingly expenses in cash of more than Rs.20K / Rs.35K (in case of transporter) will be subjected to provisions of the said section.

Regards.

Hemant Shah (Auditing) (40 Points)
Replied 13 November 2010

First of all I will ask that there is no system in the Company for giving out cash within certain fixed limit?

If it is Company or tax audit is applicable then my advise will be restrict it to less than 20K or pay it only by account payee cheque or net transfer.

It is better governance to follow the rules...

any doubt please let me know..

shailendra (Accounts Executive ) (128 Points)
Replied 15 November 2010

this advance would be treated as advance against salary and this is alllowed u/s sec40A(3) with rule 6DD

Sushmita Saha (Accounts Coordinator) (66 Points)
Replied 15 November 2010

Thanx to all you for your advice.

1 thing I would like to ask to Shailendra ( and also others can answer on this)....If this advance is to be taken as advance against salary...what is to be done say if the employees salary is Rs. 10000/-p.m?

shailendra (Accounts Executive ) (128 Points)
Replied 16 November 2010

It is not problem if employee salary is 10,000/-p.m. you can adjust that amount by deducting salary (not whole amount , some amount like i.e. 3000 per month)