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Cash Expenses

Jagdish (Article) (123 Points)

03 June 2011

Exp. paid in cash exceeding20,000/- are disallowanced.

If yes, i want to know that20,000/- at a time or aggregated amount in FY?

For example, assess incurred tea exp. of3500/- around and pays in cash every month.

To whom it is applicable? Audited assess or any other?

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22 Replies

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 03 June 2011

20000 is the limit for a day. not for the year

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CA NITUL MEHTA (KPMG-Senior Consultant-International Tax ) (236 Points)
Replied 03 June 2011

and is applicalble for all who are computimg income under income from business and proffesion and it has no relation to audit

Jagdish (Article) (123 Points)
Replied 03 June 2011

Thanks sir

If assess pays, for the bill of Rs. 30000, in two installment of Rs. 21000 on one day and 9000 on another day, then 21000 paid will be disallowed?

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 03 June 2011

yes 21000 will be disallowed(except freight) . rather than you can pass entry of 20000

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 03 June 2011

in case of freight the limit is 35000

Dhanya (nil) (62 Points)
Replied 03 June 2011

section 40 A (3) read as “ 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"

So the limit of Rs.20k is applicable to daily transaction and not aggregate amount paid in a FY as u asked.The intention of this section is to avoid making payment above Rs.20,000 to a single person on a single day otherwise than by A/C payee cheque.Provision is applicable to all assessees carrying on a business or profession.