Restrictions on issuing bearer cheque

[PRADEEP KUMAR]

Pl.tell us whether an incorporated company can freequently issue bearer cheques to its clients and employees and workers?What are restrictions on issuing bearer cheques as per company law and other laws inforce in our country?

[Mukesh Kumar]

It seems there is no restriction in issuing bearer cheque as per the general law of negotiable instrument act. Moreover, the provisions of companies act also have no provision in this regard. But, as per the provisions of Income Tax Act, you have to be careful that in certain cases to claim benefit of expenses you have to make payment through account payee cheque only. Mover over any acceptance or re payment of loan in excess of rs. 20,000 shall also be made by way of account payee cheque.

AI Summary

Account payee cheque requirement restricts bearer cheque use for expense claims and loan repayments in specified cases. There is no general prohibition under negotiable-instrument law or companies law on issuing bearer cheques, but tax rules require payment by account payee cheque for claiming certain expense deductions and for acceptance or repayment of loans above a specified monetary threshold, limiting bearer cheque use in those situations.