Section 40A(2) applies where a person has incurred any revenue expenditure on goods, services or facilities and payment for the same is made to:

                   A related person; or

                   A person who has substantial interest in the business of the assessee.

Assessee (ie Payer)

Related Person


Any relative of the individual specified u/s 2(41) (ie spouse, brother, sister, lineal

ascendant or lineal descendant of the individual)


Partners and their relatives [2(41)]


Directors and their relatives [2(41)]


Disallowance in case of Unreasonable Expenditure

If the payment made for the expenditure specified above is excessive or unreasonable having regard to the Fair Market Value (FMV)of the goods, services or facilities, that portion of the expenditure which is unreasonable or excessive shall be disallowed.

Example: Mr A has taken a godown on rent from his sister and has paid rent of Rs 5 lakhs during PY 2018-19 whereas the FMV of such rent was only Rs 4 lakhs. In this case, an amount of Rs 1 lakh shall be disallowed u/s 40A(2).

Demo Classes of Tax by Prof. Vinit Sir:

Visit Website:


Latest Blogs

Who is The Best Faculty For Accounts?

You need the Best Faculty For Accounts, CA Exam Preparation, so that you can pass your exam with Flying Colors without wasting a single minute of your Precious Time. A Good Faculty will not only help you clear your exam but also help you achieve the highest rank Possible, which proves to be surely a great advantage in Job Placement after completing CA.

Best Video Lectures for Operations Management & Strategic Management (OMSM) CMA Inter Group-2

OMSM Operations Management and Strategic Management. Get your Video Lectures Operations Management and Strategic Management from COC Education

Top Reviews

Introduction to Statistics for CA Foundation

Introduction to Statistics for CA Foundation Business Mathematics, Logical Reasoning and Statistics is designed as per latest CA Foundation syllabus for Paper 3 to provide a firm grounding in the principles, techniques and practice. The book adopts self-study approach and has been written in student-friendly manner. With a blend of conceptual learning and problem-solving approach, it offers in-depth understanding of the basic mathematical and statistical tools. #introductiontostatistics

Chapter X of Companies Act 2013

Chapter X of Companies Act 2013 The company shall place the matter relating to such appointment for ratification by members at every annual general meeting. ... Under the Act, the provisions for rotation of auditors in the listed Company & certain other class of Companies, have been provided for. #chapterxofcompaniesact2013

Relevant sections under the Companies Act, 2013 dealing with fraud and false statements

Relevant sections under the Companies Act, 2013 dealing with fraud and false statements The new parent corporate law “The Companies Act 2013” is mostly ... I am limiting my write-up to the provisions to the Act, and I request the readers to refer relevant rules, if any, before ... in the 2013 Act is the Section 447 dealing with “Punishment for fraud”. ... Section 448

What is Corporate Image

What is Corporate Image A corporate identity or corporate image is the manner in which a corporation, firm or business enterprise presents itself to the public. The corporate identity is typically visualized by branding and with the use of trademarks, but it can also include things like product design, advertising, public relations etc #WhatisCorporateImage

What is Energy Audit

What is Energy Audit An energy audit is an inspection survey and an analysis of energy flows for energy conservation in a building. It may include a process or system to reduce the amount of energy input into the system without negatively affecting the output. #whatisenergyaudit