Government of India is very serious about curbing cash transactions which fuel black parallel economy and tax evasion. This is being done on different fronts – demonetisation of high currency notes, introduction of Foreign Black Money Act, Prohibition of Benami Property Act, Prevention of Money Laundering Act, Goods and Services Tax Act and many other measures.
Simultaneously Government of India has also amended Income Tax Act effective from April 1, 2017 to discourage cash transactions with following provisions under the Act:
n Acceptance of cash more than Rs 2 lakh in aggregate in a year, in a day or for one occasion or for one event or in one transaction.
Non-compliance: Penalty 100% of the amount (Section 271DA)
n Acceptance of advance more than Rs 20,000 in a year for transfer of immovable property.
Non-compliance: Penalty 100% of such amount. (Section 269SS)
n Acceptance of loan or deposit of more than Rs 20,000 in cash.
Non-compliance: Penalty 100% of loan or deposit (Section 269SS).
n Repayment of loan or deposit in cash section 269-T
Non-compliance: Penalty 100% such of loan or deposit (Section 271E).
n Payment of any expenditure more than Rs 10,000 in a day (Payment to transport operator for Plying, Hiring or Leasing of goods carriage limit is Rs 35,000)
Non-compliance: Expenditure not allowed as deduction from income from Business & Profession (Section 40A(3)).
n Payment on more than Rs 10,000 for purchase of business assets in cash.
Non-compliance: Such amount will be reduced from the cost of assets and no depreciation will be allowed on such amount (Section 43(1)).
n Payment for donation more than Rs 2,000 in cash to political parties.
Non-compliance: Deductions not allowed (Sections 80GGB / 80GGC).
n Payment for donation more than Rs 2,000 in cash for research and rural development.
Non-compliance: Deduction not allowed (Section 80GGA).
n Payment of premium for medical Insurance in cash.
Non-compliance: Deduction not allowed of such payments (Section 80D).
n Acceptance of donation more than Rs 2,000 in cash by political parties Section 13A.
Non-compliance: Amount treated as taxable income.
n Investment linked deduction for capital expenditure more than Rs 10,000 in cash.
Non-compliance: Deduction will not be allowed of such expenditure (Section 35AD).
n Payment for donation more than Rs 2,000 in cash to funds or trusts approved for Section 80G.
Non-compliance: Deduction not allowed (Section 80G).
Better than remembering these cash limits to avoid penalties, additional tax and other consequences, it is advisable to develop the habit of making and receiving payments through account payee cheques or account payee bank drafts or by use of electronic clearing system through a bank account. Also note that payment by bearer cheque is treated as cash payment.
