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CS Professional · Advanced Direct Tax Laws and Practice · Tax Audit

For the cash tests in section 63 of the Income-tax Act, 2025, how is a payment or receipt by a cheque drawn on a bank that is not an account payee cheque treated?

Such a payment or receipt is treated as cash. Section 63(5)(b) deems a cheque drawn on a bank, or a bank draft, that is not account payee to be a cash payment or receipt, so it counts toward the 5% cash limits for the ten crore threshold.

  1. AIt is treated as a non-cash payment or receipt
  2. BIt is treated as a cash payment or receiptCorrect
  3. CIt is ignored for the purpose of the 5% tests
  4. DIt is treated as cash only if it exceeds Rs 10,000

Explanation

Section 63(5)(b) provides that a payment or receipt by a cheque drawn on a bank, or by a bank draft, which is not account payee, is deemed to be a cash payment or receipt. So such amounts count toward the 5% cash limits. No monetary threshold is stated for this deeming.

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