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Cash payment exceeding 20000 section 40a(3)(a)

Page no : 2

Siddharth Goel (Chartered Accountant) (3026 Points)
Replied 03 July 2018

Originally posted by : Gagandeep Singh
Dear Sir,

For Example: If Mr. A is a service  provider of Rs. 1,00,000 to Mr. B. It was agreed by both the parties that loan will be paid in installment of Rs. 19,500 each.

if there is payment of loan by installment in cash to Mr. A of Rs. 20500  which includes 19,500 loan amount and 1,000 as penalty for 2 days late payment  Will that amount be allowed as deduction.

 

Please explain

 

Thanks

Cash payment of more than Rs. 10,000 is disallowed under section 40A(3) in a single day. It does not matter what is the nature of the payment, whether it is on account of loan installment or related penalty. Therefore, the whole of the payment shall be disallowed if it is excess of Rs. 10,000/-. 



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