Fixed deposit above 20000

Most banks insist on opening a savings bank account befor opening a FD a/c. They might also ask for introduction from a customer if you are directly opening an account. Some banks don't insist on that now. You will have to provise ID proof, photographs, address proof etc.

Every depositor while opening a Fixed Deposit Account by tendering cash shall be required to furnish PAN/GIR Number or submit Form 60/61 if the deposit amount exceed Rs.50,000/-. By fufilling the banks conditions you can open the Fd a/c in cash.(Rs 20000/- limit for Fd.. not heard of)

40A(3) is not applicable to payments made to Banking Companies(Scheduled Commercial Banks). But, 40A(3) is not applicable on investments, only revenue expenditure.

And making a fixed deposit is not an expenditure, Manish. It is an investment, hence even if the payment was not being made to a Bank, 40A(3) would not have been attracted. 40A(3) is only attracted in the case of a revenue expenditure.

Originally posted by : Madhavi Pandit

Most banks insist on opening a savings bank account befor opening a FD a/c. They might also ask for introduction from a customer if you are directly opening an account. Some banks don't insist on that now. You will have to provise ID proof, photographs, address proof etc. Every depositor while opening a Fixed Deposit Account by tendering cash shall be required to furnish PAN/GIR Number or submit Form 60/61 if the deposit amount exceed Rs.50,000/-. By fufilling the banks conditions you can open the Fd a/c in cash.

Moreover, Section-40A(3) of IT Act, 1961 applies when an assessee incurs revenue expenditure exceeding Rs.20,000/- otherwise than by an account payee cheque or an account payee demand draft, deductible u/h "PGBP", subject to exceptionsas per Rule 6DD which includes payment to banking & other credit institutions. Since opening an FD is an investment expenditure, sec-40A(3) not applicable in this case.

Cash FD of a large sum might invoke section 69. 

Yes, if the FD made is not disclosed in the books of accounts, Section 69 might apply.

Section 69

“Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.”

Addition will be made to the income of the assessee and the AO may initiate the penalty under section 271(1)(c) either for concealment of particulars of income or for furnishing inaccurate particulars of income depending on the nature of addition made by him.