Penalties Section 40A(3) — Disallowance for Cash Payments Over ₹10,000
Section 40A(3) — Disallowance for Cash Payments Over ₹10,000
Income Tax Act 1961 — 40A(3)
The Penalty
100% disallowance of the offending payment
- Cap
- The full offending payment
- Calculation base
- Aggregate cash payment to a single person in a single day
- Period
- Per payment.
When does this apply?
Payment for an otherwise-deductible expense made in cash (or bearer cheque) to one person on one day exceeds ₹10,000; ₹35,000 for goods carriage.
Calculate this amount
This estimate applies only the rate and caps published in the authored rule for this page.
Worked examples
| Scenario | Calculation | Result |
|---|---|---|
| Cash payment ₹25,000 for rent to landlord (single day) | Entire ₹25,000 disallowed | ₹25,000 |
| Cash payment ₹30,000 to transporter (₹35k threshold) | Within transporter threshold — allowed | ₹0 |
How it is levied
AO adds back the disallowed amount in the assessment. Rule 6DD lists exceptions (bank holidays, absence of banking facility, salary to migrant labour, etc.) — the assessee has the burden to establish the exception.
Confirm the ₹10,000 general limit and ₹35,000 transporter limit have not been amended by a subsequent Finance Act. Rule 6DD exceptions are strictly construed — do not rely on general urgency arguments.