Income Tax Act Sections 40A(3) & 40A(3A) limit cash expense deductions to prevent tax evasion; Rule 6DD exceptions apply.
Sections 40A(3) and 40A(3A) of the Income Tax Act restrict deductions for business expenses paid in cash exceeding 10,000 in a day to a single person, unless made by account payee cheque, bank draft, or electronic clearing system. Exceptions outlined in Rule 6DD include payments to specified banks, government, or for certain goods and services, among others. For transportation-related expenses, the limit is 35,000. These sections aim to prevent tax evasion by ensuring transparency in financial transactions. Payments made under specific conditions, such as in areas without banking services or during bank holidays, are also exempt.
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