What is an Account Payee Cheque & How to Issue?

Clause 21 of the Bill seeks to amend section 56 of the Income-tax Act relating to income from other sources. “(XI) from such class of persons and subject to such conditions, as may be prescribed.”. Clause 18 of the Bill seeks to amend section 50C of the Income-tax Act relating to special provision for full value of consideration in certain cases. The said section provides that any income of a political party which is chargeable under the head “Income from house property” or “Income from other sources” or “Capital Gains” or income from voluntary contributions shall not be included in the total income of the previous year of such political party.

1. If a definition is provided as suggested earlier all amendments and amended provisions would become very easy and certain at least as per present position about approved methods of fund transfers.
2. In order to encourage other electronic modes of payment, it is proposed to amend the above section so as to include such other electronic mode as may be prescribed, in addition to the already existing permissible modes of payment in the form of an account payee cheque or an account payee bank draft or the electronic clearing system through a bank account.
3. In section 50C of the Income-tax Act, in sub-section (1), in the second proviso, for the words “bank account”, the words “bank account or through such other electronic mode as may be prescribed” shall be substituted with effect from the 1st day of April, 2020.
4. After that, the bank will deposit the money into your account in two or more days.
5. In section 43 of the Income-tax Act, in clause (1), in the second proviso, for the words “bank account”, the words “bank account or through such other electronic mode as may be prescribed” shall be substituted with effect from the 1st day of April, 2020.
6. The account payee cheque secures your transfer as the payment can only be deposited in the payee’s account.

There will always be a party that provides the goods or services and a party that receives the goods or services in any type of transaction. To receive goods or services, a payer must exchange value, which is usually money, with the payee. It is proposed to amend the said clause (b) so as to empower the Board to make rules to provide that deduction of an amount equal to thirty per cent.

A crossed cheque differs from an account payee cheque in several ways. It is proposed to amend the said clause (f) so as to empower the Board to make rules to provide that payment made through such other electronic mode as may be prescribed shall also be allowed as deduction. After you deposit the cheque, the banker completes the process and delivers the amount to the payee. A clearing facility receives and processes information and pictures of cheques electronically from banks, and it passes the procedure over to the other bank. As a result, it serves as an intermediate between the banking institutions for cheque clearance. After receiving the payment through this cheque, the payee can’t endorse the account payee cheque to anyone else.

How to issue an account payee cheque?

Therefore, for simplification of provisions it would be better to insert a definition of approved modes of payments and receipts. The definition can include presently recognised methods and also other new methods as may be prescribed/ notified. Modes for payment and receipts were also fewer- crossed cheque, a/c payee cheque or bank draft etc.

Steps to write Account Payee Cheque

Clause 11 of the Bill seeks to amend section 40A of the Income-tax Act relating to expenses or payments not deductible in certain circumstances. Clause 9 of the Bill seeks to amend section 35AD of the Income-tax Act relating to deduction in respect of expenditure on specified business. The transmission of a cheque between one individual to the following individual and this process you can refer to as an endorsement. Whenever the recipient of a cross cheque has to make a payment, he\she can shift the cheque to his\her creditor. He\she must enter the endorsing guidelines on the reverse of the cross cheque to accomplish this. The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice.

Sub-sections (3), (3A) and (4) of the said section provide for disallowance of any expenditure for which the assessee makes payment (or an aggregate of payments) exceeding ten thousand rupees through any mode other than through an account payee cheque or an account payee bank draft or using the electronic clearing system through a bank account. In order to encourage other electronic modes of payment, it is proposed to amend the above section so as to include such other electronic mode as may be prescribed, in addition to the already existing permissible modes of payment in the form of an account payee cheque or an account payee bank draft or the electronic clearing system through a bank account. Section 44AD of the Act relates to presumptive taxation scheme for eligible businesses and provides that in case of an assessee engaged in an eligible business shall be eligible to avail the benefit of the presumptive taxation scheme if the profit from such business is declared at at the rate of eight per cent.

Sub-section (1) of the said section defines the term “actual cost” to mean the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority. (ii) in sub-section (4), after the words “such cheque or draft or electronic clearing system”, the words “or such other electronic mode as may be prescribed” shall be inserted. The said section provides for deduction to an assessee of the whole of any expenditure of capital nature incurred, wholly and exclusively, for the purposes of any specified business carried on by him during the previous year in which such expenditure is incurred by him. The first proviso to the said section lays down conditions to be satisfied by a political party in order for the provisions of this section to be applicable. The APC is a super security form of cheque since one can put money only into the payee’s accounts, and the recipient does not have permission to mark this cheque for anybody else.

In the budget proposals we find several proposal for prescribed new type of electronic modes for payment and receipts. In all such proposals it is mentioned that “Or through such other electronic mode as may be prescribed” We find some of such proposals vide clauses 8,9,11,12,14,16, a/c payee 18, 21 & 27. There may be some more such proposals and this list may not be exhaustive. The account payee cheque secures your transfer as the payment can only be deposited in the payee’s account.

1. The party receiving the payment is known as the payee in the case of a promissory note, wherein one party promises to pay another party a predefined sum.
2. In all such proposals it is mentioned that “Or through such other electronic mode as may be prescribed” We find some of such proposals vide clauses 8,9,11,12,14,16, 18, 21 & 27.
3. After filling out the form, clip the cheque to the form and drop it inside the cheque deposit box or hand it over to the bank official.
4. Cheques are a popular way of paying in India since they are secure and simple.
5. An order cheque has the term ‘Bearer’ crossed out and the word ‘to Order’.
6. Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting.

IDFC FIRST Bank Cash Management Services

Furthermore, there is no requirement of endorsing these cheques, and they may be quickly given to a 3rd party. This term is primarily used in the context of banking, finance, and legal transactions. Clause 27 of the Bill seeks to amend section 80JJAA of the Income-tax Act relating to deduction in respect of employment of new employees.

In section 80JJAA of the Income-tax Act, in the Explanation, in clause (i), in the first proviso, in clause (b), for the words “bank account”, the words “bank account or through such other electronic mode as may be prescribed” shall be substituted with effect from the 1st day of April, 2020. In section 43 of the Income-tax Act, in clause (1), in the second proviso, for the words “bank account”, the words “bank account or through such other electronic mode as may be prescribed” shall be substituted with effect from the 1st day of April, 2020. In section 13A of the Income-tax Act, in the first proviso, in clause (d), for the words “bank account”, the words “bank account or through such other electronic mode as may be prescribed” shall be substituted with effect from the 1st day of April, 2020.

The bank is usually the drawee, and the drawer instructs the bank to draw the amount. A payee is the person or entity to whom the final payment is made, and his/her/its name appears on the cheque. As a result, in the case of an account payee cheque, payment shall be done only by depositing it into the payee’s account.

A/C PAYEE ONLY STAMP

To further understand the notion, one must first distinguish among the three terms mentioned below. All orders are now shipping as usual and will be dispatched within 1-2 business days. Clause 16 of the Bill seeks to amend section 44AD of the Income-tax Act relating to special provision for computing profits and gains of business on presumptive basis. Clause 12 of the Bill seeks to amend section 43 of the Income-tax Act relating to definitions of certain terms relevant to income from profits and gains of business or profession.

An order cheque has the term ‘Bearer’ crossed out and the word ‘to Order’. This form of the cheque has comparable properties to a bearer cheque, but one cannot endorse it simply by giving it over to somebody else. After opening a bank account, you will be provided with a kit in an envelope. Inside the envelope, you will find important elements such as an ATM/Debit Card, a Welcome Letter and a Chequebook.