Check this Income Tax provisions before entering into Cash Transactions

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In order to promote digitisation system in the economy, the Central Government of India is making amendments in laws in every year’s budget.

Take an example of Budget of F.Y.2017-18, the government has introduced new section 269ST limiting cash transactions above Rs. 2 lakhs.

There are no exceptions to this. Even gift received in cash form close relatives above Rs. 2 lakhs come under the ambit of this section.

At present there are also certain other provisions which have either a cap or a complete ban on cash transactions.

Here are some of those transactions and the penalty you may attract for flouting the rules:

Sr. no.TransactionsSectionsCap on cash transactionPenalty for cash transaction
1Disallowance for cash expenditure40A(3)Payment of any expenditure above Rs. 10,000No deduction
Payments for plying, hiring or leasing of goods carriage above Rs 35,000
2Determination of actual cost of asset43(1)Payment above 10,000 for purchase of assetSuch payment won’t be included in actual cost of asset (viz, No depreciation)
3Prohibition on receiving cash269STRs. 2,00,000 or more100% of amount received
Examples of Transactions referred to in (3):
(a)  In aggregate from a person in a dayE.g. if a person receives Rs. 2.25 lakhs in cash for 2 different bills of Rs. 1 lakhs and 1.25 lakhs.Then also Penalty is levied of 100% of amount received.
(b)  In respect of single transactionIf there is single bill of Rs. 3.10 lakhs and cash is received on different days of Rs. 1.6 lakhs and 1.5 lakhs.Then also Penalty is levied of 100% of amount received.
(c)  In respect of transactions relating to one event or occasion from a personE.g. If marriage is one occasion and a person receives amount of Rs. 3 lakhs.Then penalty is levied of 100% of amount received.
To whom does Section 269ST applies?To any person receiving cash above Rs. 2,00,000/-.
For which transactions is Section 269ST not applicable?Restrictions on cash receipt of Rs. 2 lakhs or more w.e.f. 01.04.2017 shall not apply to-
a) Government, any Banking company, post savings bank or co-operative bank;
b) Transactions of the nature referred to in Section 269SS;
c) Such other persons or class of persons or receipts, as may be specified by the Central Government by notification in the Official Gazette.
4Withdrawal of cash from Bank accountAs per Press Release issued by Finance Ministry, Department of Revenue dtd. 05.04.2017, Cash withdrawals from Government, any Banking company, post savings bank or co-operative bank is permissible.No contravention of the Section, hence no penalty shall be levied.
5Prohibition on acceptance of cash loans, deposits, etc.269SSRs. 20,000 or more100% of amount received
6Prohibition on repayment of loans or deposits in cash269TRs. 20,000 or more100% of amount paid
7Health Insurance premium80DNo cash payment allowedNo deduction
8Investment linked deduction for capital expenditure35ADPayment above Rs 10,000 for any capital expenditureNo deduction
9Donations to certain funds and charitable institutions80GDonations above Rs. 2,000No deduction
10Donations for scientific research or rural development.80GGACash donation above Rs. 10,000No deduction
11Donations by companies to political parties.80GGBNo cash payment allowedNo deduction
12Donations by any person to political parties80GGCNo cash payment allowedNo deduction
13Dealings in cash in immovable property transactions269ST & 269TAcceptance or repayment of loan, deposit or advance from any person above Rs. 20,000/- in cashPenalty is 100% of the amount accepted or repaid.
(amended w.e.f. 01.06.2015)

Credits : CA Shraddha Kothari

Disclaimer: This article is only for General Public Information and not a professional advice. Please consult your legal advisor before taking any decision. We are not finanacially liable for any loss incurred by any person.

 

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