Regarding Applicability of 40A

A firm has business of selling  2 wheelers vehicles. It pays RTO tax in cash in excess of Rs.20000/- per day. Further, Partners withdraw cash in excess of Rs.20000/- per day. Whether 40A limit of Rs.20000/- is applicable for RTO tax and partner cash withdraw or not ?

Replies (2)
Quick Summary
This discussion explores the applicability of Section 40A(3) of the Income Tax Act concerning a 2-wheeler dealership. Specifically, it questions whether the Rs. 20,000 daily cash payment limit applies to RTO taxes and partner cash withdrawals. While RTO tax might be exempt as a government payment, the limit could still affect disallowed expenditures related to partner withdrawals.

RTO may come under exemption related to govt.

But limit is applicable to partner's
Section is 40(A) 3 .
It's a disallowed expenditure.

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