The Statutory Brief

IT Act 1961 → 2025 / Section 40A(3)

Business income

Section 40A(3) → Section 36

Disallowance of cash expenses above ₹10,000 a day (and related-party payments)

Section 40A(3) of the old Income-tax Act, 1961 · new section 36 under the Income-tax Act, 2025

New reference Section 36(4) to (8) (40A(2) → 36(2), (3))

Income-tax Act, 1961Section 40A(3)

  • 40A(3): cash payments above ₹10,000 a day to a person disallowed (₹35,000 for transporters)
  • 40A(3A): later cash payment of an allowed liability deemed income
  • 40A(2): excessive payments to related persons disallowed

Applies to FY 2025-26 (AY 2026-27) and earlier years.

Income-tax Act, 2025Section 36(4) to (8) (40A(2) → 36(2), (3))

  • Section 36(4): expenditure paid otherwise than by specified banking/online mode above ₹10,000 a day disallowed
  • 36(5): later payment of an earlier-allowed liability deemed income
  • 36(6): ₹35,000 for plying, hiring or leasing goods carriages
  • Related-party excessive payments: 36(2) with the 'specified person' table in 36(3)

Applies from tax year 2026-27 (from 1 April 2026).

What changed

Renumbered and the related-party definitions set out as a table. Limits unchanged.

Practice notes

  • Exceptions (old Rule 6DD) continue to be prescribed under 36(7).
  • The CBDT mapping lists old 40A against sections 29, 32 and 36; the cash and related-party rules are in section 36.

These are summaries, not the statutory text. Read the bare Act for both sections on the Income Tax Department's official site, which also has a side-by-side comparison utility.

Frequently asked

What is the cash payment limit for business expenses under the new Income Tax Act 2025?

₹10,000 per person per day (₹35,000 for goods transporters); cash payments above this are disallowed under section 36(4).

What is section 40A(3) called in the new Income-tax Act, 2025?

Section 40A(3) of the Income-tax Act, 1961 corresponds to Section 36(4) to (8) (40A(2) → 36(2), (3)) of the Income-tax Act, 2025, which applies from 1 April 2026 (tax year 2026-27).

What changed in section 40A(3) under the new Income Tax Act?

Renumbered and the related-party definitions set out as a table. Limits unchanged.

Is section 40A(3) still applicable for FY 2025-26?

Yes. Income of FY 2025-26 (AY 2026-27) and earlier years is governed by section 40A(3) of the 1961 Act. Section 36(4) to (8) (40A(2) → 36(2), (3)) of the 2025 Act applies from tax year 2026-27.

Related sections

269ST→186No cash receipt of ₹2 lakh or more43B→37Deductions allowed only on actual payment (taxes, PF, bonus, leave encashment, MSME dues)44AD→58Presumptive taxation for small businesses and professionals