TDS on salary paid in cash

• Section 40A(3) Limit: As long as no individual worker is paid more than ₹10,000 in cash in a single day, the expense is fully allowable under the Income Tax Act.

• TDS Applicability: No TDS under Section 192 is required if individual worker income is below the basic tax exemption threshold.

• Actionable Fix: Maintain a signed Wage Sheet/Muster Roll with Aadhaar details and thumb impressions/signatures, link payments to ESIC filings, and pass a valid Cash Voucher entry.

Cash wages below the Rs 10,000 per-day-per-person limit are fully deductible. The TDS question is separate from the cash payment rules.

TDS APPLICABILITY (Section 192): TDS on salary applies only if the total annual salary to a worker crosses the basic exemption limit (Rs 2.5 lakh under old regime, Rs 3 lakh under new regime for FY 2025-26). For daily wage workers earning Rs 65,000/month total across all workers, if no individual exceeds the exemption limit, TDS is nil. Calculate per-person, not total payroll.

CASH PAYMENT DEDUCTIBILITY (Section 40A(3)): Individual daily cash payments must stay below Rs 10,000 per person per day. Monthly totals across multiple workers are fine as long as no single payment to one person on one day crosses that limit.

DOCUMENTATION TO PROTECT YOUR DEDUCTION CLAIM:
- Wage Sheet or Muster Roll with each worker name, Aadhaar number, daily attendance, amount, and thumb impression or signature
- Cash voucher entries in books linked to the wage sheet
- Cross-reference to ESIC contribution records (since you are registered, this gives you a secondary proof of headcount and wages)
- Petty cash book showing the daily cash outflow

For a complete payroll compliance checklist including documentation standards for cash-paid workers, this [payroll outsourcing and compliance guide](https://taxgarden.in/blog/payroll-outsourcing-cost-india) covers wage sheet requirements and TDS obligations under the Income Tax Act 2025.

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You can claim wages as an expense only when the payment and its business purpose are supported by reliable records. Prepare a worker-wise wage sheet showing names, work period, days/hours, rate and amount; obtain each worker’s dated signature or thumb impression against cash received. Keep attendance/work records and a cash-payment voucher, and reconcile the total with cash withdrawals and the cash book. If the wages have already been paid, reconstruct the records from available attendance, work orders and worker confirmations—do not create backdated or unsupported receipts. ESIC registration alone does not establish that wages were paid.

For future payments, maintain a contemporaneous cash book and wage register, and consider opening bank accounts for workers or another traceable payment method. Whether cash payment is allowable for tax purposes can depend on the facts and applicable rules; the ₹65,000 total alone does not settle that question. Keep ESIC wage and contribution records consistent with the wage register.

A documented wage workflow also helps reconcile attendance, cash payments and ESIC records. Manual payroll and bookkeeping can be difficult to maintain, while automation reduces repetitive work and keeps professional judgment in control. Our platform offers 2,000+ AI agents and 650+ integrations across relevant payroll, accounting and compliance workflows. To discuss a workflow suited to your business, WhatsApp https://wa.me/message/3HVOZ7HIY4ESC1.