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

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

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?

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

in case of freight the limit is 35000

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.

Originally posted by : future ca
	in case of freight the limit is 35000

Agreed.

Good definition given by Dhanya. Thank u

i m also agreed with Dhanya

20000 for one party per day will be allowable for deduction

if we pay cash in a day to parties name A and B  19500 and 19700 then it will be allowed or disallowed ????

since its below 20000  it will be allowed provided aggregate payment in a day to each of them doesn't  exceed  20k

Amount paid to A person in A DAY exceeding Rs.20000 is disallouwed 

Originally posted by : nikhil
	if we pay cash in a day to parties name A and B  19500 and 19700 then it will be allowed or disallowed ????

SINCE A AND B R TWO DIFFERENT PARTIES . HENCE IT IS ALLOWABLE