Test the payment aggregate, not just the invoice amount
For tax year 2026–27, section 39(2) of the Income-tax Act, 2025 excludes from actual cost qualifying acquisition payments exceeding ₹10,000 in a day to a person when made otherwise than through specified banking or online mode. The test covers acquisition of an asset or part of it. The amount tested is not merely the excess above ₹10,000. This guide checks the Act as amended by Finance Act, 2026 on 27 October 2026; it does not renumber the earlier FY 2025–26 return. Income-tax Act, 2025: sections 39(2) and 66(32).
Build a payee-day payment ledger
Collect asset invoices, payment dates, payee identity and mode evidence. Aggregate relevant non-qualifying-mode payments to the same person on the same day, including split vouchers. Keep distinct people and dates separately. A voucher-level check can miss an aggregate breach, while an invoice-level check can wrongly exclude an entire asset purchased mostly through an accepted mode. Income-tax Act, 2025: sections 39(2) and 66(32).
Verify the mode before treating it as accepted
Section 66(32) defines the specified mode to include account-payee cheque, account-payee bank draft, electronic clearing through a bank account and other prescribed electronic modes. Retain the actual banking trail. Merely writing bank payment in a ledger does not demonstrate account-payee status. This guide does not assume that every cheque, wallet or digital instruction satisfies the definition. Income-tax Act, 2025: sections 39(2) and 66(32).
Separate cost exclusion from book accounting
Prepare a gross acquisition cost, excluded payment and remaining tax-cost bridge. Accounting capitalisation and settlement of a supplier do not themselves reverse the tax restriction. The examples isolate section 39(2), assume all stated costs otherwise qualify, and omit GST credits, grants, depreciation rates and other adjustments. An actual asset register must incorporate those independently applicable provisions. Income-tax Act, 2025: sections 39(2) and 66(32).
Do not import a different cash-payment rule automatically
Section 36 contains separate revenue-expenditure payment provisions. Its goods-carriage threshold or prescribed exception framework should not simply be copied into section 39(2). Where facts involve an agent, a reimbursement, a disputed payee or an asserted exception, identify the actual acquisition payment and governing provision before concluding. Cash genuine in commercial terms can still require exclusion under this cost rule. Income-tax Act, 2025: sections 39(2) and 66(32).
Applicable primary references
Income-tax Act, 2025: sections 39(2) and 66(32)
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Exactly at the boundary
An asset costs ₹80,000. Payment is ₹10,000 cash and ₹70,000 by an account-payee cheque, both documented. The cash amount does not exceed ₹10,000. On these isolated assumptions section 39(2) excludes zero and remaining cost is ₹80,000.
Illustrative example 2: One rupee above the boundary
An asset costs ₹80,000. Cash paid to its seller in one day is ₹10,001; the balance ₹69,999 is paid by account-payee cheque. Excluded payment is ₹10,001, leaving ₹69,999, rather than excluding only ₹1.
Illustrative example 3: Two vouchers to the same seller
A ₹1,00,000 asset is funded by same-day cash vouchers of ₹6,000 and ₹5,000 to one seller, plus ₹89,000 by accepted mode. The daily cash aggregate is ₹11,000. Exclusion is ₹11,000 and remaining cost ₹89,000.
Illustrative example 4: Different days remain separate in the test
A ₹1,00,000 asset is paid through ₹8,000 cash on each of two genuinely distinct dates and ₹84,000 by accepted mode. Each daily cash total is ₹8,000. Under the stated test alone exclusion is zero, leaving ₹1,00,000. This is a computation of actual facts, not advice to disguise one payment.
Illustrative example 5: Two genuine sellers
Two assets cost ₹50,000 each. Their distinct sellers each receive ₹9,000 cash on one day and ₹41,000 by accepted mode. Each payee-day aggregate is ₹9,000. No payment is excluded under this isolated rule; combined remaining cost is ₹1,00,000. Confirm that the payees are actually distinct.
Illustrative example 6: Allocate the excluded cash to the assets
One seller receives same-day cash of ₹7,000 for asset A and ₹6,000 for asset B. A costs ₹60,000 and B ₹40,000, with the balances paid by accepted mode. The ₹13,000 daily aggregate exceeds the threshold. Exclude the actual ₹7,000 and ₹6,000 respectively; remaining costs are ₹53,000 and ₹34,000, totalling ₹87,000.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Fix the applicable period | 2025 Act tax year or earlier-law return |
| 2 | Identify acquired assets | Invoice and asset register |
| 3 | Identify actual payees | Supplier master and receipts |
| 4 | Record actual payment dates | Cash and bank evidence |
| 5 | Verify payment modes | Account-payee and electronic trail |
| 6 | Aggregate non-qualifying payments | Payee-day schedule |
| 7 | Test whether the total exceeds 10,000 | Boundary calculation |
| 8 | Exclude the relevant payments | Asset-specific allocation |
| 9 | Add separate statutory adjustments | Credits, grants and other cost rules |
| 10 | Reconcile and approve tax cost | Book-to-tax asset bridge |
Sixteen practitioner FAQs
1. Does the rule test every voucher separately?
No. Relevant payments to the same person in a day must be aggregated.
2. Does exactly ₹10,000 exceed the threshold?
No. The text uses exceeding ₹10,000.
3. Is only the amount above ₹10,000 excluded?
No. Identify the qualifying payment or aggregate itself, not just the excess.
4. Does an ₹80,000 invoice automatically fail?
No. Examine how the acquisition payments were made.
5. Can an accepted-mode balance remain in cost?
The examples retain it, subject to all other applicable actual-cost provisions.
6. Does account-payee status matter?
Yes. Preserve evidence rather than assuming every cheque meets the specified mode.
7. Does an accounting cash label prove the legal mode?
No. Verify the underlying instrument or payment trail.
8. Are separate dates aggregated as one day?
Use actual dates and examine the facts; the illustrated statutory test is daily.
9. Can payees be split artificially in the master?
No. Establish the real person receiving the acquisition payment.
10. What if one seller supplies two assets?
Check the payee-day aggregate and allocate excluded actual payments to their respective assets.
11. Does book capitalisation override the exclusion?
No. Maintain a separate tax-cost reconciliation.
12. Does this guide calculate depreciation?
No. Rate, block, use and other conditions are separate.
13. Can the revenue goods-carriage threshold be assumed here?
No. Do not transplant another provision’s threshold into section 39(2).
14. Is commercial genuineness alone sufficient?
It does not remove the need to apply the actual-cost payment rule.
15. Does this guide confirm every digital mode?
No. Verify the statutory definition and applicable prescribed mode.
16. Which file best supports the final figure?
A payee-day payment schedule linked to invoices, mode evidence and the tax asset register.
Conclusion
Test asset-acquisition payments by payee, day and payment mode under section 39(2), then reconcile excluded payments to the depreciable tax-cost register.