Cash expenses above Rs. 10,000 are disallowed
The section 40A(3) of Income Tax Act, 1961 provides that any expenditure in respect of which a payment or aggregate of payments made to a person in a day exceeds Rs 10,000 shall not be treated as valid application of income for 12A/10(23C) registered association, if such payment is made in cash.
The payments of amount exceeding Rs 10,000 shall be treated as valid application of income only when such payment is made through an account payee cheque or account payee demand draft or through any other banking channel. Further, where the expenses are recognized on accrual basis in any particular year and actual payment for same is made in subsequent year, in this case also the cash payment in excess of Rs. 10,000 shall not be treated as valid application of income and will be disallowed and such added back to the income of the year [40A(3A)].