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Lakshy (Semi-Qualified C.A. PGDFM BCom.)     13 May 2017

Salary paid in cash to employee

Dear Friends,

Salary Paid to Employee more than Rs. 10,000/- in cash will hit section 40A(3) ?

 5 Replies


PRABIR PAUL (*****Accountant***** Never insult to any person for any kind of lack of knowledge or misread.)     13 May 2017

Think physically what can be happen...

First of all imagine one thing that if your books of accounts is called for scrutiny then this expenses will be disallow only if you declare the same in 1 day.

But one thing you should be imagine that if you break up the fegure in 2 or 3 days in books of accounts then how A.O. can understand it?

So this type of little bit expenses no question for disallowance.




S.K.Jha (student)     13 May 2017

Dear Lakshy,

Any Payment in excess of Rs. 20,000 without ACCOUNT PAYEE CHEQUE or ACCOUNT PAYEE DRAFT will attract 40A (3). In your case 40A (3) will not attract.



RAMA KRISHNAN   13 May 2017

from. a.y. 2018-19, expenses in excess of 10000 will be disallowed. as mr. paul said, the salary expenses can preclude 40A(3) disallowance by making payments on 2 or 3 different days but however the recipient will hit by 269ST..correct me if i'm wrong

PRABIR PAUL (*****Accountant***** Never insult to any person for any kind of lack of knowledge or misread.)     13 May 2017

Mr. Rama Krishnan 269st is applicable in the hands of recipient not hands of payer.

Here Mr. Lakshy(Who placed this question) is a payer so section 269st is not attract in the hand of Mr. Lakshy.

And other thing if employee received salary in cash more than 1,99,999 then it will be attract in the hands of employee. But just think a logic that department how to know that an employee received cash more than 1,99,999/-?

1 Like

S.K.Jha (student)     13 May 2017


No person shall receive an amount of two lakh rupees or more—

  1. in aggregate from a person in a day; or
  2. in respect of a single transaction; or
  3. in respect of transactions relating to one event or occasion from a person,

otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account.

The section is worded so as to be applicable to the person receiving the money. For every receipt, there is a person making the payment as well. However the section is applicable to the recipient.

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