Exceptions to Section 40A(3): Rule 6DD
Cases and Circumstances in which payment above Rs.20000 can be made in
As per Rule 6DD, payment above Rs.20000 in a day can be
made to a single person under the following circumstances:
a. Where a payment is
The Reserve Bank of India or any banking company as
defined in Section 5(c) of the Banking Regulation Act, 1949.
The State Bank of India or any subsidiary bank as
defined in section 2 of the State Bank of India (Subsidiary Banks) Act,
Any Co-Operative Bank or Land Mortgage
Any Primary Agricultural Credit Society or any Primary
Credit Society as defined under section 56 of the Banking Regulation Act,
The Life Insurance Corporation of India established under section 3 of the Life Insurance
Corporation Act, 1956.
b. Where the
payment is made to the Government and, under the rules framed by it, such payment is required to be made
in legal tender.
c. Where the
payment is made by:
Any Letter of Credit arrangements through a bank
A mail or telegraphic transfer through a bank
A book adjustment from any account in a bank to any other account in that or any other
A bill of exchange made payable only to a bank.
The use of electronic clearing system through a bank account.
A credit card
(vii) A debit card.
d. Where the payment is
made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or
services rendered by the assessee to such payee.
e. Where the payment is
made for the purchase of :
Agricultural or forest produce; or
The produce of animal husbandry (including livestock, meat, hides and skins) or dairy or
poultry farming; or
Fish or fish products; or
The products of horticulture or apiculture,
To the cultivator, grower or producer of such articles,
produce or products;
f. Where the
payment is made for the purchase of the products manufactured or processed without the aid of power in a
cottage industry, to the producer of such products.
g. Where the payment is
made in a village or town, which on the date of such payment is not served by any bank, to any person who
ordinarily resides, or is carrying on any business, profession or vocation, in any such village or
h. Where any payment is
made to an employee of the assessee or the heir of any such employee, on or in connection with the
retirement, retrenchment, resignation, discharge or death of such employee, on account of gratuity,
retrenchment compensation or similar terminal benefit and the aggregate of such sums payable to the employee
or his heir does not exceed fifty thousand rupees.
the payment is made by an assessee by way of salary to his employee after deducting the income tax from
salary in accordance with the provisions of section 192 of the Act, and when such employee:
Is temporarily posted for a continuous period of fifteen days or more in a place other
than his normal place of duty or on a ship; and
Does not maintain any account in any bank at such place or ship
the payment was required to be made on a day on which the banks were closed either on account of holiday or
k. Where the payment is
made by any person to his agent who is required to make payment in cash for goods or services on behalf of
the payment is made by an authorised dealer or a money changer against purchase of foreign currency or
travellers cheque in the normal course of his business.
It is clarified that for the purposes of clause (l), the expression
“authorised dealer” or “money changer” means a person authorised as authorised dealer or money changer to deal
in foreign currency or foreign exchange under any law for the time being in force.
It is clarified that for the purposes of clause (c) and clause (g) above,
the term “bank” means any bank, banking company or society referred to in sub clauses (i) to (iv) of clause (a)
of the Banking Regulation Act, 1949 and includes any bank (not being a banking company as defined in clause (c)
of section 5 of the Banking Regulation Act, 1949), whether incorporated or not, which is established outside
Crossed cheque versus account payee
cheque--Section 123 of the Negotiable Instruments Act, 1881 provides that where
a cheque bears across its face an addition of the words "and company" or any abbreviation thereof, between
two parallel transverse lines, or of two parallel transverse lines, simply, either with or without the words
"not negotiable", that addition shall be deemed to be a crossing and the cheque shall be deemed to be crossed
Section 124 of the said Act provides that where cheque
bears across its Ace an addition of the name of a banker, either with or without the words "not negotiable",
that addition shall be deemed a crossing, and the cheque shall be deemed to be crossed specially, and to be
crossed to that banker.
Section 126 of the said Act provides that where a cheque
is crossed generally, the banker, on whom it is drawn shall not pay it otherwise than to a banker. It also
provides that where a cheque is crossed specially, the banker on whom it is drawn shall not pay it otherwise
than to the banker to whom it is crossed, or his agent, for collection.
To conclude, a crossed cheque can be paid to anybody through
banking channels but an account payee cheque can be paid only through the account to whom it is