labels: economy - general, banks & institutions
Change in IT Act likely to curb misuse of crossed chequesnews
03 December 2005

New Delhi: The finance ministry is planning to make amendments to Section 40A of the Income Tax Act to check unaccounted transactions by business assesees through crossed cheques and demand drafts.

Section 40A stipulates that a business assesee would not be allowed tax deduction for payments exceeding Rs20,000 unless the payment is made through a crossed cheque or a crossed bank draft.

Tax experts said Section 40A had been introduced after some firms in the unorganised sector were found to be claiming tax benefits on payments of Rs50,000 and above in cash by showing such payments as a business expense.

Officials said it had been brought to the notice of the income tax department that even crossed cheques and bank drafts were being used to settle temporary outstanding dues as most cheques and drafts had a 90-day validity.



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Change in IT Act likely to curb misuse of crossed cheques