Home › CA Inter › taxation › Profits and Gains of Business or Profession › Section 40A(3) disallows the ENTIRE expenditure …
Section 40A(3) disallows the ENTIRE expenditure where payment to a single person in a single day, otherwise than by prescribed banking or electronic modes, exceeds:
ARs 10,000
BRs 20,000
CRs 35,000
DRs 50,000
Answer & Solution
Correct answer: A. Rs 10,000
1. Section 40A(3) tests the payment or AGGREGATE of payments made to a person in a day.
2. If that aggregate exceeds Rs 10,000 and the payment is not by account payee cheque/draft, ECS or a prescribed electronic mode, the whole expenditure is disallowed.
3. A higher limit of Rs 35,000 applies only to payments to transport operators for plying, hiring or leasing goods carriages — option C is that special limit, not the general one.
_Source: ICAI CA Inter P3(A) Income-tax SM (May 2026), Ch 3 Unit 3 PGBP, PDF p. 89_
Related questions
Which statement about the deductibility of Securities Transaction Tax (STT) and CommoditieA firm's net profit is Rs 17,00,000 before deducting partner salary of Rs 9,60,000, deprecA tyre manufacturer (opted out of the default regime) instals plant and machinery of Rs 12Unpaid interest of Rs 45,00,000 due to a State Financial Corporation and a bank was converA trader's turnover for P.Y. 2025-26 is Rs 8 crore. Cash receipts are 3 per cent of total An eligible 44AD assessee has turnover of Rs 2,98,50,000, of which Rs 14,00,000 was receivA car purchased on 10.8.2022 for Rs 5,25,000 for personal use was brought into professionaA company claimed Rs 50,00,000 under section 35AD for a warehouse building in A.Y. 2025-26