Rule 6DD [Exception to Section 40A(3)]

Rule 6DD [Exception to Section 40A(3)]

Rule 6DD [Exception to Section 40A(3)]:

Cases where CASH payment exceeding Rs. 10,000 is Allowed:-

  1. Salary of Employee after deducting TDS where, employee is temporarily posted greater than or equal to 15 days continuously at place (not place of duty) or ship & at that place, employee does not have any bank accounts.
  2. Terminal benefit upto Rs. 50,000 to employee.

For general understanding:

Terminal benefit is the last amount paid to employee either on termination or resignation or in other cases. Firstly we have to check the applicability of Sec 40A(3) after that check the applicability of Rule 6DD. If in any case Sec 40A(3) is not applicable then Rule 6DD will also not applicable.

For Example:

Case 1: 

Number of days employee continuously posted is 18 and payment made to employee is Rs. 30,000 in cash. Whether such expenditure is disallowed?

Sol: Check firstly whether Sec 40A(3) is applicable or not(i.e. amount paid in cash exceed Rs. 10,000) and then check whether the condition of Rule 6DD is satisfied or not(i.e. no. of days is greater than equal to 10)?. In this case conditions of both the sections are satisfied hence amount of Rs. 30,000 is not disallowed.

Case 2:  Number of days employee continuously posted is 9 and payment made to employee is Rs. 15,000 in cash. Whether such expenditure is disallowed?

Sol: Check firstly whether Sec 40A(3) is applicable or not(i.e. amount paid in cash exceed Rs. 10,000) and then check whether the condition of Rule 6DD is satisfied or not (i.e. no. of days is greater than equal to 10)?. In this case conditions of sections 40A(3) is satisfied but conditions of Rule 6DD is not satisfied hence the amount of Rs. 15,000 is disallowed.

Case 3:  Number of days employee continuously posted is 25 and payment made to employee is Rs. 8,000 in cash. Whether such expenditure is disallowed?

Sol: Check firstly whether Sec 40A(3) is applicable or not (i.e. amount paid in cash exceed Rs. 10,000) and then check whether the condition of Rule 6DD is satisfied or not (i.e. no. of days is greater than equal to 10)?. In this case conditions of sections 40A(3) is  not satisfied and consequently the conditions of Rule 6DD is not applicable hence the amount of Rs. 8,000 is not disallowed.

Case 4:  Number of days employee continuously posted is 12 and payment made to employee is Rs. 5,000 in cash. Whether such expenditure is disallowed?

Sol: Check firstly whether Sec 40A(3) is applicable or not (i.e. amount paid in cash exceed Rs. 10,000) and then check whether the condition of Rule 6DD is satisfied or not (i.e. no. of days is greater than equal to 10)?. In this case conditions of sections 40A(3) is  not satisfied and consequently the conditions of Rule 6DD is not applicable hence the amount of Rs. 5,000 is not disallowed.

 

                                                                                                                                                                                 -SAHIL JAIN

 

For any query in the above article the author can be contacted at jainsahil038@gmail.com

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