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Cash payments in excess of rs.20,000/-

Tax queries 1112 views 3 replies

hai good morning to every one..... i have a doubt in the following instance.

My client is a trust, maintainin group of institutions. there they are paying salaries to the employees monthly after deducting tds perfectly. But in that group of educational institutions,for one institution employees they are paying salaries in cash after deducting tds. they are arguing that we are promptly deducting tds and no disallowance would raise on the base of Rs. 20,000/- above salary cash payment. 

Pls clarify me  whether the above arguement is correct ? Is it incompliance with the rule 6DD ? is there any exception to the trusts ?

Thanking you

 

Replies (3)
According to rule 6 dd of the income tax act, 1961the following payment will not be disallowed " 39[(j) where the payment is made by an assessee by way of salary to his employee after deducting the income-tax from salary in accordance with the provisions of section 192 of the Act, and when such employee (A) is temporarily posted for a continuous period of fifteen days or more in a place other than his normal place of duty or on a ship; and (B) does not maintain any account in any bank at such place or ship;" If your client satisfy the above mentioned condition then the payment need not be disallowed. Otherwise such cash payment is disallowed u/s 40A(3). There is no exemption to trusts in this regard.therefore Sec 40A(3) applies to trusts also.

dear raghavendra

it seems that in your case , your client has properly deducted tax from the employees income as  per slab rates. 

in order to ensure that they are entitled to the exemption under rule 6DD check whether

1.such employee  is temporarily posted for a continuous period of fifteen days (or more) in a place other than his normal place of duty or on a ship

and that;

2.he does not maintain any account in any bank at such place or ship



 

Your salar payment shall be disallowed.

 


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