Income Tax 40A(3)

Section 40(3) of the Income-tax Act is applicable only for business transaction .
The only consequence for not following the procedure - i.c. payment otherwise than by crossed cheque or crossed emand draft - is that 20%of such payments will be disallowed in computing the total income of the assessee.

your expense will be disallowed for PGBP in case of payment above 20,000

smartca1980 @ rediffmail.com

It is applicable expenses under the head profits and gains but also to expenses claimed under the head Income from other sources. Please refer sec 58 of the IT ACT

- sec. 40A(3) is apply for both business as will as individual transactions, but it should be noted that  
  there should be business transctions.
- No sec.40A(3) is apply only such business transactions which is REVENUE in nature.
- the consequences will be ,20% of such expenditure will be not allowed as deducation , but it should be  
  noted that thare must be expenditure more than 20000 also payment of such expenditure should be
  more than 20000 AT ONCE.
- no thare is no panalty for recerver.

Dear friend if I am wrong please  sugest me......

If any company make payment exceeding Rs.20000 to their employee as a tour advance in that case also 40A(3) applied or not?

Provisions of Sec 40A (3) does not apply in respect of an expenditure which is not to be claimed as deduction u/s.30 to 37. Tour Advance to employee is not an expenditure deductible u/s. 30 to 37. Further, in case of violation of provisions of Sec. 40A (3), disallowance u/s.40A (3) will be 100% of such expenditure instead of 20% from Asstt Year 2008-09 onwards.

40A (3) is applicable only for business transactions, when expenditure of cash payment exceeds 20,000 otherwise than by crossed cheque or crossed demand draft. Then the entire amount of expenditure is disallowed ,not 20% from the Asseessment Year2007-08.There are some eceptions with respect to aforesaid section you can read with concerned rules.

Disallowance U/s 40A (3) is 100% of such expenditure from the Assessment year 2008-09 onwards

 

Originally posted by :S Subramanian
"	Section 40(3) of the Income-tax Act is applicable only for business transaction . The only consequence for not following the procedure - i.c. payment otherwise than by crossed cheque or crossed emand draft - is that 20%of such payments will be disallowed in computing the total income of the assessee.	"