Applicability of 40A(3)

[Pradeep Kumar]

Dear all

If we make the payment in cash more than 20000 then 40A(3) will be considered. My question is , If we make the payment of salary or full and final settlement to any employee then there is any need to check the compliance of 40A(3).

Thanks and regards

Pradeep Kumar

[Harish Chander Bhatia]

Applicability of 40A(3)

 Yes, section 40A(3) is squarely applicable to the salaries paid, as it is claim as an expenses. It is advised the higher salary should always be paid by cheques  to establish it genuniity. 

[Pradeep Kumar]

Thanks Harish.....

AI Summary

Section 40A(3) Applies to Cash Payments Over 20k for Salaries; Use Cheques for Authenticity A query was raised regarding the applicability of Section 40A(3) of the Income Tax Act to cash payments exceeding 20,000, specifically in the context of salary or full and final settlements to employees. A respondent confirmed that Section 40A(3) applies to such payments since they are considered expenses. It was advised to pay higher salaries by cheque to ensure authenticity. The discussion concluded with an acknowledgment of the advice provided.