Relaxation on cash expenses Section 21(l)
Previously, where a company pays any expenditure exceeding fifty thousand rupees, under a single account head, otherwise than by cross cheque or other banking instruments, such person was not allowed deduction for such expense while computing his taxable income for the year. Now, the Finance Act has increased the said threshold of cash expenses from Rs. 50,000 to Rs. 250,000.
Furthermore, previously any salary exceeding Rs. 15,000 was required to be paid through banking channel. The Finance Act 2020 has increased to said limit of Rs. 15,000 to Rs. 25,000.
Furthermore, previously any expense exceeding Rs. 10,000 was required to be paid through banking channel. The Finance Act has increased the said limit of Rs. 10,000 to Rs. 25,000.
An addition is approved to be made for disallowance of any expenditure on account of utility bill in excess of such limits and in violation of such conditions as may be prescribed.
The Finance Act has inserted a new clause q under section 21(1) which prohibits sales to un-registered persons. The said clause states that any expenditure attributable to sales made to persons required to be registered but not registered under the Sales Tax Act, 1990 by an industrial undertaking computed according to the following formula, namely:
(A/B) x C
A is the total amount of deductions claimed under this Part; B is the turnover for the tax year; and
C is the total amount of sales exclusive of sales tax and federal excise duty to persons required to be registered but not registered under the Sales Tax Act, 1990 where sales equal or exceed rupees one hundred million per person:
Provided that disallowance of expenditure under this clause shall not exceed ten percent of total deductions claimed under this Part.
Provided further that the Board may, by notification in the official Gazette, exempt persons or classes of persons from this clause subject to such conditions and limitations as may be specified therein. Provided also that this clause shall come into force with effect from the first day of October, 2020.