cash transaction section 40A(3)


cash transaction section 40A(3) – At present the government is making a lot of efforts to reduce and keep a check on the transactions done in cash.

Because, the transactions done in cash by any person are not able to come in the eyes of the government, due to which the government is not able to make proper tax assessment of any person and due to this the government gets less collection of tax.

In the Income Tax Act 1961 also, many such sections have been brought by the government, which tell the limit for doing transactions in cash and if cash transaction is done in excess of the stated limit, then penalty or any other charges will be levied on that transaction. can go.

A similar important section has been added to the Income Tax Act, 1961, which specifies the limit for a person to pay in cash and what rules of the Income Tax Act are applicable to that person on payment of cash in excess of that limit. It also tells about

The name of this section of the Income Tax Act is section 40A(3).

In today's article (cash transaction section 40A(3)), we will learn about the rules related to cash transactions.

Section 40A(3) – cash transaction section 40A(3)

Section 40A(3) of the Income Tax Act lays down the rules and limits for cash transactions by a business person. This section is applicable to all the persons like – Individual, Firm, LLP, Company etc.

According to section 40A(3), if any person makes any payment in cash of more than 10,000 rupees in a day to any other person, then he will not get exemption from that expenditure.

That is, one person, one day and a limit of 10,000.

For example, you have bought any goods worth 45 thousand from any other person. If you paid 45 thousand in cash on the same day, then this 45 thousand payment made by you will be disallowed. That is, according to the Income Tax Act, it will not be considered as your expense in the computation of your income and it will not be deducted from your income.

Therefore, if you are making any payment more than 10 thousand, then do it through Account Payee Cheque, Account Payee Bank Draft, Internet Banking or through prescribed electronic mode only.

What are the prescribed electronic modes?

  • Credit Card
  • Debit Card
  • Net banking
  • IMPS( Immediate Payment Service )
  • UPI (Unified Payment Interface )
  • RTGS ( Real Time Gross Settlement)
  • NEFT ( National Electronic Fund Transfer )
  • BHIM (Bharat Interface for Money )
  • Aadhaar Pay

When will the limit of 10 thousand cash payment not be applicable?

If, you pay rent to any person for plying, hiring or leasing any goods, then the limit of cash payment will be considered as Rs 35,000, not 10 thousand.

But in some special situations, you can pay more than 10 thousand in cash. These special situations are described in rule 6DD.
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rule 6DD

Section 40A(3) is not applicable in certain situations, which are mentioned in rule 6DD. That is, in these situations, if you pay more than 10,000 in cash, then that payment will be valid for you.

The situation of rule 6DD is –
  • If you make payment to any bank or other credit institution, such as - RBI, commercial bank, co- operative society, lic etc.
  • To the government,
  • Payment is made through banking system, such as - (letter of credit, mail or telegraphic transfer, bills of exchange, book adjustment of one bank account to another bank account, by credit or debit card, etc.
  • When payment is being made by mutually setting off any other liability of the supplier of any goods or services,
  • Payment is being made to a person who lives or does business in a village or town where there is no bank,
If a farmer, producer or producer has been paid for
  • For agricultural or forest produce
    • for products of animal husbandry (including live stock, meats, hides and skins) or for dairy or poultry farming,
  • for fish or fish products,
  • beekeeping
  • When a producer of cottage industries is being paid for such products, which are made without the aid of power,
  • When payment is being made by an employer to his employee after deducting TDS as per section 192 , in the following case,
    • temporarily working for 15 consecutive days or more from the place of his duty to any other place or ship and
    • If he does not have any bank account at that place or ship
  • gratuity or retirement compensation or any other benefit not exceeding Rs.50,000 to an employee on retirement , retrenchment or death ,
  • If there is any such payment which has been made on the day of Bank Holiday or Strike and this payment is required to be made on the same day,
  • payment made by a person to his agent who pays for goods and services in cash on behalf of that person ,
  • When payment made for purchase of foreign currency or traveler's check by an authorized dealer or money changer.
These rule 6DD situation if a person in a cache of more than 10 thousand payment is to be taken off the expenses.

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