If any expenditure has been paid otherwise then through Account payee cheque

Payment 10000 in a single day

          OR

Aggregate of all transaction in a day  10000

Then the expense is not allowed as deduction

(1) In case payment is made to a goods transport operator (person in the business of plying /Hiring / leasing of goods carriages)  then limit is 35000 per day  

(2) This section is only applicable regarding expenses hence it is not applicable on transaction such as purchase of fixed assets or repayment of loan 

 

Exceptions

Following payments are allowed even if amount is more than 10000/350000 and amount not paid by account payee cheque. .

(1) Payment by debit card / credit card / online fund transfer /TT (Telegraphic transfer) / loan from bank / book adjustment by bank from one account to another.

(2) Payment to any bank / RBI /LIC / Agricultural Credit Society

(3) Payment made in legal tender given to government.

(4) Any adjustment made in books (Journal Entry passed in Books adjusting the amount)

(5) Payment for agricultural purpose (horticulture / Apiculture / Pisciculture / Animal Husbandry Covered here) 

(6) Payment, in village of loan which does not have any bank, to a person who lives in such Village or has business in such village .

(7) Payment to cottage industry which is working without power (this can be in village or in city )

(8) During bank holiday or bank strikes payment can be made in cash

(9) Money changer can make payments in cash in exchange of for foreign currency .

(10) Payment to agent when agent has to make payment in cash on behalf of the person.

(11) Any salary paid to an employee who is

              temporarily posted for 15 days or more in a place other normal place

                 and

             does not maintain any account at such place

           (if a employee is posted on a ship then also covered here)

(12) Any payment paid on retirement/retrenchment/resignation/death of employee if such payment does not exceed Rs.50000. Such amount may be paid to the employee or this heir (on death of employee etc) .

Questions

Q1

Proft and Loss of Ajay & Co,a proprietorship for FY 2015-16
SALES 750000
Less  
EXPENSES 600000
PROFIT 150000

Suppose Expenses Include

Cash payment made to following persons

Party Name Particulars Amount
A LTD Cash Paid for purchase of goods 10000
B LTD Cash Paid for purchase of goods 25000
C LTD Cash Paid for purchase of furniture 30000
D LTD Cash Paid for Goods transport 35000
  Total 100000
View Answer

Note:-

On goods transport,deduction not available

  1. Practical Income Tax
  2. Corporate Income Tax

About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 8 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .