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Payment of salary in cash

Avinash Jeevan Dsouza (Assistant In Charge Accountant) (3283 Points)

07 April 2020

Can we pay salary in cash for above 10K?

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12 Replies

Mandakulathur Ananthanarayanan (186 Points)
Replied 07 April 2020

There is no prohibition as such to pay salary in cash. However, the expenditure would not be deductible in view of section 40A(3) in employer co.'s books.

RAJA P M ("Do the Right Thing...!!!") (127133 Points)
Replied 07 April 2020

@ Mr Avinash Jeevan Dsouza.,

Yes... You can pay salary through Cash. above 10k.

CA Naveen Chand (Chartered Accountant) (12729 Points)
Replied 07 April 2020

YES

subject to Sec 40A(3)

rama krishnan (12234 Points)
Replied 07 April 2020

But it will not be eligible for deduction u/s.40A(3)

Avinash Jeevan Dsouza (Assistant In Charge Accountant) (3283 Points)
Replied 08 April 2020

So if one employee gross salary is 12500 and employee has a deduction of 3000 as rent and food. Employee net salary will be 9500/-. If we pay 9,500/- by cash will it be subject to section 40a(3) ?

RAJA P M ("Do the Right Thing...!!!") (127133 Points)
Replied 08 April 2020

You can give as per above amount. No more problem...

You can give salary and wages above 10k. it's not atract any penalties...

But,
It's advisable to take bank account after 2 or 3 months for the employee. It's not advisable to long time...

1 Like

Avinash Jeevan Dsouza (Assistant In Charge Accountant) (3283 Points)
Replied 08 April 2020

Originally posted by : RAJA P M
	You can give as per above amount. No more problem... You can give salary and wages above 10k. it's not atract any penalties...But, It's advisable to take bank account after 2 or 3 months for the employee. It's not advisable to long time...

Ok thank you sir. We follow the same method. For first 2-3 months we pay through cash. Once they get their bank account we pay through bank transfer.

RAJA P M ("Do the Right Thing...!!!") (127133 Points)
Replied 08 April 2020

Well...
In case the employees are can't get bank account (some of the other state employees can't have valid documents for opening bank account & some emoloyers can't give their attention to opening account by employees) then give through Cash mode with splitting and 2 or 3 more times...

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rama krishnan (12234 Points)
Replied 08 April 2020

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—
(i) 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
(ii) does not maintain any account in any bank at such place or ship;

these are the two exceptions where salary can be made in cash in excess of 10k. apart from this, payment in excess of 10k whether it's salary or wages is admissible

1 Like

Avinash Jeevan Dsouza (Assistant In Charge Accountant) (3283 Points)
Replied 08 April 2020

Originally posted by : RAJA P M
	Well...In case the employees are can't get bank account (some of the other state employees can't have valid documents for opening bank account & some emoloyers can't give their attention to opening account by employees) then give through Cash mode with splitting and 2 or 3 more times...

Ok Sir. Like you said there will be problem because of documentation. We have more than 2000 permanent staff. 98% we pay through bank transfer. We will do as per your suggestion. Thank you once again.

Avinash Jeevan Dsouza (Assistant In Charge Accountant) (3283 Points)
Replied 08 April 2020

Originally posted by : rama krishnan
	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—(i) 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(ii) does not maintain any account in any bank at such place or ship;these are the two exceptions where salary can be made in cash in excess of 10k. apart from this, payment in excess of 10k whether it's salary or wages is admissible

Thank you sir. "Such place" refers to? Is it state or City or District?