cash expenditure / expneses u/s 40A(3)

[BAL KRISHAN GARG]

Dear All Members , I have one querry regarding Section 40A (3) regarding disallowability of cash expenditure of exceeding Rs.20,000 /- at a time . I have one doubt that if A purchases goods worth Rs. 70,000 /- and paid Rs.15000/- at one time in a day but during 2009 -10 on few occassions he paid in cash but not exceeding Rs.20,000/- at a time but during whole day it is Rs.40,000 /- to the same person . Earlier the ceiling was Rs.20,000 /- on one occassion as per my memory .But whether it is now as Rs.20,000/- per day instead of one time ? Please clarify the same . Thanks to all BAL KRISHAN GARG

[CAGOPALJI AGRAWAL]

Yes, Balkishan Ji. From the AY 2009-10, the limit is Rs. 20000/- per expendidure per day.

[Surender Gupta]

Yes, the views of GopalJi are correct. The provisions of section 40A(3) has been amended vide Finance Act, 2008, w.e.f. 1-4-2009

AI Summary

Cash payment limit under section 40A(3) now applies per day per recipient, affecting tax deductibility. The Finance Act, 2008 amendment to section 40A(3), effective 1-4-2009, establishes that the cash-payment ceiling applies to each expenditure per day per recipient; multiple cash payments to the same person in one day are to be aggregated for the purpose of the section's disallowance.