40A(3):Payment of any expenditure in Cash or through bearer cheque shall not be allowed as deduction under Income Tax Act, if :-
The amount individually or in aggregate exceed INR 10,000 in a single day AND
Payment is made to a single person.
40A(3A): If any expenditure is allowed as deduction in any Year on accrual basis and payment is made subsequently in the next Previous Year, then the deduction allowed will be treated as Income of Previous year provided:
Amount is paid in Cash or through bearer cheque
The amount individually or in aggregate exceed INR 10,000 in a single day AND
Payment is made to a single person.
Business of plying, hiring or leasing goods carriages, the limit is INR 35,000 instead of INR 10,000
Mode of Payment permissible:
Account payee cheque or Account payee bank draft
Credit Card/Debit Card;
Net Banking;
IMPS (Immediate Payment Service);
UPI (Unified Payment Interface);
RTGS (Real Time Gross Settlement); and NEFT (National Electronic Funds Transfer); and
BHIM (Bharat Interface for Money) Aadhar Pay;
Rule 6DD: Cases and circumstances in which a payment or aggregate of payments exceeding 10,000 may be made to a person in a day, otherwise than by permissible mode above:
(a) where the payment is made to:
RBI or any banking company
SBI or any subsidiary bank
any co-operative bank or land mortgage bank;
any primary agricultural credit society or any primary credit society;
LIC of India
(b) where the payment is made to the Government and, under the rules framed by it, such payment is required to be made in legal tender;
(c)where the payment is made by:
any letter of credit arrangements through a bank;
a mail or telegraphic transfer through a bank;
a book adjustment from any account in a bank to any other account in that or any other bank;
a bill of exchange made payable only to a bank
(d) Book Adjustment: where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee;
(e) where the payment is made to the cultivator, grower or producer for the purchase of following items:-
agricultural or forest produce; or
the produce of animal husbandry (including livestock, meat, hides and skins) or
dairy or poultry farming;
fish or fish products; or
the products of horticulture or apiculture,
(f) where the payment is made for the purchase of the products manufactured or processed without the aid of power in a cottage industry, to the producer of such products;
(g) No Banking Facility :where the payment is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town;
(h) Up to 50,000 allowed: where any payment is made to an employee or his heir ,on account of gratuity, retrenchment compensation or similar terminal benefit and the aggregate of such sums payable to the employee or his heir does not exceed 50,000 rupees;
(i) where the payment is made by an assessee by way of salary to his employee after deducting TDS as per section 192 of the Act, and when such employee:
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
does not maintain any account in any bank at such place or ship;
(k) where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person;
(l) where the payment is made by an authorised dealer or a money changer against purchase of foreign currency or travellers cheques in the normal course of his business.
m) where payment is made on a Banking holiday or National Holiday
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