CGST Act 2017 has no provision restricting cash transactions, but In order to, curb black money ,the government has imposed various restrictions on cash receipts /payments and cash withdrawal from time to time through Income Tax Act 1961.
The Government has amended clause 84 of Section 194N vide Finance Act 2020 . Accordingly TDS @ 2% is required to be deduced by Banks ( private / public /co operative ) and post office , for cash withdrawal between 20 Lakhs to 1 crores if the withdrawer has not filed his tax return for three years . For cash withdrawal more than Rs 1 crore TDS @ 5%. Is required to be deducted .
Further, 269ST of Income Tax Act 1961 provides that no person shall receive an amount of Rs 2,00,000 or more: –
(a) In aggregate from a person in a single day : Mr . A sold an item amounting to Rs 2,50,000/- to Mr B and received 5 installments of Rs 50000/- in a single day . He has received more than Rs 2,00,000/- in a single day.
(b) In respect of a single transaction : In the example above , if Mr. A receives 5 installments in 5 days , still the transaction covers under sec 269ST of Income Tax Act as amount received against a single transaction.
(c) In respect of transactions relating to one event or occasion from a person : A caterer receives cash of more than Rs. 2 lakh in respect of a marriage even if separate bills are made and payment are received on separate days.
Note : The Cash Transactions Limit is applicable on receiver and not the payer.
Non Applicability of section 269ST : This section is not applicable on
(i) Any receipt by Government , banking company, post office savings bank or co-operative bank
(ii) transactions of nature referred to in section 269SS (Section 269SS deals with provisions related to receiving loan or deposit from specified person )
(iii) such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.
The CBDT vide press release dated 5th April 2017 clarified that the said cash transaction limit of Rs 2 lakh will not apply to withdrawal from banks, cooperative bank and post offices.
Penalty – Sum equal to the amount of such receipt shall be liable to be paid by the receiver as the penalty under Section 271DA of Income Tax Act. No penalty shall be impossible if such person proves that there were good and sufficient reasons for the contravention. Also, the penalty is imposed on the receiver, not on the payer.
Other relevant points related to the provision under section 269ST of I Tax Act 1961
(a) Penalty would be levied even if the defaulter does not have PAN.
(b) Bearer cheque and self cheque will also be considered as cash for the purpose of this provision .
(c) Restriction under section 269ST is applicable even if amount if received for personal Purpose and not for business purpose.
EXPENDITURE MADE IN CASH : As per section 40A(3) of Income Tax Act 1961 , any expenditure in respect of which payment is made for sum exceeding Rs.10,000/- in a single day to a single person otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account, shall not be allowed as deduction.
Threshold Limit – Cash payment exceeding Rs 10,000 to a person in a single day. The limit is extended to Rs. 35,000 in case the payments are being made for plying, hiring or leasing of goods carriage to a person in a single day.
Section 40A(3):– Any expenditure in respect of which payment is made in sum exceeding rs.10,000/- in a single day to a single person otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account, shall not be allowed as deducation.
(Republished with Amendments. Amendments been made by CA Anita Bhadra)