Income Tax Act, 2025
Section 5: Ins. by Act 23 of 2012, s. 12 (w.e.f. 12013).
5. Ins. by Act 23 of 2012, s. 12 (w.e.f. 12013).
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(B) where the assessee being a company, firm, association of persons or Hindu undivided
family, or any director of such company, partner of such firm or member of the association or
family, or any relative of such director, partner or member, has a substantial interest in the
business or profession of that person.
Explanation.—For the purposes of this sub-section, a person shall be deemed to have a substantial
interest in a business or profession, if,—
(a) in a case where the business or profession is carried on by a company, such person is, at
any time during the previous year, the beneficial owner of shares (not being shares entitled to a
fixed rate of dividend whether with or without a right to participate in profits) carrying not less
than twenty per cent of the voting power; and
(b) in any other case, such person is, at any time during the previous year, beneficially
entitled to not less than twenty per cent of the profits of such business or profession.
1[(3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of
payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or
account payee bank draft, 2[or use of electronic clearing system through a bank account, exceeds ten thousand
rupees], no deduction shall be allowed in respect of such expenditure.
(3A) Where an allowance has been made in the assessment for any year in respect of any liability
incurred by the assessee for any expenditure and subsequently during any previous year (hereinafter
referred to as subsequent year) the assessee makes payment in respect thereof, otherwise than by an
account payee cheque drawn on a bank or account payee bank draft 3[or use of electronic clearing system
through a bank account], the payment so made shall be deemed to be the profits and gains of business or
profession and accordingly chargeable to income-tax as income of the subsequent year if the payment or
aggregate of payments made to a person in a day, exceeds 4[ten thousand rupees]:
Provided that no disallowance shall be made and no payment shall be deemed to be the profits and
gains of business or profession under sub-section (3) and this sub-section where a payment or aggregate
of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or
account payee bank draft, 2[or use of electronic clearing system through a bank account, exceeds ten thousand
rupees], in such cases and under such circumstances as may be prescribed, having regard to the nature and
extent of banking facilities available, considerations of business expediency and other relevant factors:]
5[Provided further that in the case of payment made for plying, hiring or leasing goods carriages, the
provisions of sub-sections (3) and (3A) shall have effect as if for the words 4[ten thousand rupees], the
words “thirty-five thousand rupees” had been substituted.]
6[(4) Notwithstanding anything contained in any other law for the time being in force or in any
contract, where any payment in respect of any expenditure has to be made by 7[an account payee cheque
drawn on a bank or account payee bank draft] 3[or use of electronic clearing system through a bank
account] in order that such expenditure may not be disallowed as a deduction under sub-section (3), then
the payment may be made by such cheque or draft; 8[or electronic clearing system] and where the
where the assessee being a company, firm, association of persons or Hindu undivided
family, or any director of such company, partner of such firm or member of the association or
family, or any relative of such director, partner or member, has a substantial interest in the
business or profession of that person.
Explanation.—For the purposes of this sub-section, a person shall be deemed to have a substantial
interest in a business or profession, if,—
in a case where the business or profession is carried on by a company, such person is, at
any time during the previous year, the beneficial owner of shares (not being shares entitled to a
fixed rate of dividend whether with or without a right to participate in profits) carrying not less
than twenty per cent of the voting power; and
in any other case, such person is, at any time during the previous year, beneficially
entitled to not less than twenty per cent of the profits of such business or profession.
1[
Where the assessee incurs any expenditure in respect of which a payment or aggregate of
payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or
account payee bank draft, 2[or use of electronic clearing system through a bank account, exceeds ten thousand
rupees], no deduction shall be allowed in respect of such expenditure.
Where an allowance has been made in the assessment for any year in respect of any liability
incurred by the assessee for any expenditure and subsequently during any previous year (hereinafter
referred to as subsequent year) the assessee makes payment in respect thereof, otherwise than by an
account payee cheque drawn on a bank or account payee bank draft 3[or use of electronic clearing system
through a bank account], the payment so made shall be deemed to be the profits and gains of business or
profession and accordingly chargeable to income-tax as income of the subsequent year if the payment or
aggregate of payments made to a person in a day, exceeds 4[ten thousand rupees]:
Provided that no disallowance shall be made and no payment shall be deemed to be the profits and
gains of business or profession under sub-section
and this sub-section where a payment or aggregate
of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or
account payee bank draft, 2[or use of electronic clearing system through a bank account, exceeds ten thousand
rupees], in such cases and under such circumstances as may be prescribed, having regard to the nature and
extent of banking facilities available, considerations of business expediency and other relevant factors:]
5[Provided further that in the case of payment made for plying, hiring or leasing goods carriages, the
provisions of sub-sections
and
shall have effect as if for the words 4[ten thousand rupees], the
words “thirty-five thousand rupees” had been substituted.]
6[
Notwithstanding anything contained in any other law for the time being in force or in any
contract, where any payment in respect of any expenditure has to be made by 7[an account payee cheque
drawn on a bank or account payee bank draft] 3[or use of electronic clearing system through a bank
account] in order that such expenditure may not be disallowed as a deduction under sub-section