Can cash payment made for Vehicle and Equipment insurance.

[Sanjoy Das]

Dear Sir,

Let us know whether vehicle insurance and equipment insurance made by cash. If it is disallowed , kindly let us know the IT U/s ?

Regards

Sanjoy Das

[MAHENDRA SURANA]

Mr. Sanjoy Das

Insurance premium is covered u/s 36(1)(i) of Income tax , 1961. Which silent about cheque or cash payment . But Section 40A(3) of Income tax Act,1961 restrict to Rs, 20,000/- in cash if more than that it should be paid by A/c payee cheque or Bank Draft subject to some condition.Otherwise it may disallowed as per the provision of Sec 40A(3)

AI Summary

Cash payment restriction may render insurance premium deduction ineligible unless paid by account-payee cheque or bank draft.
Insurance premiums for vehicles and equipment are prima facie deductible as business expenditure, but a separate rule limits cash payments beyond a specified threshold and requires account-payee cheque or bank draft; cash payments exceeding that threshold may be disallowed unless conditions or exceptions are met.