CS Professional · Advanced Direct Tax Laws and Practice · Tax Audit
Under section 63 of the Income-tax Act, 2025, which payment or receipt is deemed to be in cash for the cash-transaction test?
A receipt by a bank cheque that is not account payee is deemed cash. The Act treats non-account-payee cheques and drafts as cash for the 5% test, whereas account payee instruments and bank transfers are not treated as cash.
- AA payment by an account payee cheque drawn on a bank
- BA receipt by a cheque drawn on a bank that is not account payeeCorrect
- CA payment by bank draft that is account payee
- DA receipt through a bank transfer
Explanation
Section 63(5)(b) deems payment or receipt by a cheque drawn on a bank or a bank draft which is not account payee to be in cash. Account payee instruments and transfers are not deemed cash.
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