CA Shraddha Kothari

CA Shraddha KothariIn 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. Transactions Sections Cap on cash transaction Penalty for cash transaction
1 Disallowance for cash expenditure 40A(3) Payment of any expenditure above Rs. 10,000 No deduction
Payments for plying, hiring or leasing of goods carriage above Rs 35,000
2 Determination of actual cost of asset 43(1) Payment above 10,000 for purchase of asset Such payment won’t be included in actual cost of asset (viz, No depreciation)
3 Prohibition on receiving cash 269ST Rs. 2,00,000 or more 100% of amount received
Examples of Transactions referred to in (3):
(a)  In aggregate from a person in a day E.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 transaction If 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 person E.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.
4 Withdrawal of cash from Bank account As 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.
5 Prohibition on acceptance of cash loans, deposits, etc. 269SS Rs. 20,000 or more 100% of amount received
6 Prohibition on repayment of loans or deposits in cash 269T Rs. 20,000 or more 100% of amount paid
7 Health Insurance premium 80D No cash payment allowed No deduction
8 Investment linked deduction for capital expenditure 35AD Payment above Rs 10,000 for any capital expenditure No deduction
9 Donations to certain funds and charitable institutions 80G Donations above Rs. 2,000 No deduction
10 Donations for scientific research or rural development. 80GGA Cash donation above Rs. 10,000 No deduction
11 Donations by companies to political parties. 80GGB No cash payment allowed No deduction
12 Donations by any person to political parties 80GGC No cash payment allowed No deduction
13 Dealings in cash in immovable property transactions 269ST & 269T Acceptance or repayment of loan, deposit or advance from any person above Rs. 20,000/- in cash Penalty is 100% of the amount accepted or repaid.
(amended w.e.f. 01.06.2015)

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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35 responses to “Beware of Income Tax provisions before entering into Cash Transactions”

  1. shabbir challawala says:

    can I withdraw a cash of Rs.2lakh /monthly from my fees as construction advisors, for monthly cash expenses against multiple expenses like personal conveyance,medical /medicine purchase,travel,food expenses etc,

  2. Heena Goswami says:

    Nice article Shraddha

  3. Heena Goswami says:

    Nice article @ Shraddha Kothari

  4. Mayur Arora says:

    Hello shradha.thank you so much for sharing the article.
    Kindly tell is it possible to receive and pay cash against multiple bills each bill being less than 200000 and each payment being less than 10000 ..between same persons.

    Thanks.

    • Shraddha says:

      Your answer is covered in:A person cannot receive in aggregate Rs. 2lakhs or more in a single day:
      eg: If on same day a person receives Rs. 2lakhs in cash in aggregate from a person(multiple bills of same person), or
      or in respect of a single transaction:
      eg: Receives Rs. 2lakhs or more in cash on different days against a single bill,
      then it will be violation of provision as per my view. Refer examples given in the table.

    • Shraddha says:

      For cash payment of expenses, it will covered u/s. 40A(3). The limit is Rs. 10,000/- per day per person.

  5. CA MITHUN MALAVADE says:

    Section 269 ST covered precisely. Good informative table about the aspect of Rs.2 Lakhs and above transactions. Good Job.

  6. sumit poddar says:

    Assuming i am a trader ,can i purchase good upto 200000 in single day for a single person. And dose section 269st speak about signle day or whole year

  7. Devendra says:

    I have confusion why some sites telling 269st limit Rs 2 Lacs whereas in the budget is says Rs 3 Lakhs and i have read other articles on your site also it is also conflicting. please remove the incorrect information your other post article url is http://taxguru.in/income-tax/sec-269st-cash-receipt-danger.html
    as in the budget it is saying Rs 3 Lakhs Pdf link is here indiabudget.nic.in/ub2017-18/memo/memo.pdf

    Please give link of press release dated 05.04.2017 as change in transaction limit.

    • Shraddha says:

      In Budget 2017-18, a ban on cash transactions of more than Rs 3 lakhs has been proposed. The same has been mentioned in the Finance Bill 2017.But, the Govt of India has made amendment in Finance bill and has reduced the Cash transaction limit to Rs 2 Lakhs wef 01.04.2017 .Further the govt issued press release on 05.04.2017 exempting cash withdrawals from banks.etc. above 2lakhs, then no penalty.

  8. GANDHI MOHAN BHARATI says:

    In village marriages, individuals pay from Rs.10/- to Rs.1,000/- as gift to the Bride or the Groom. If the total cash received exceeds Rs.2.00 lakhs is it punishable?

    • Rohit says:

      As mentioned, cash received from a single person shall invite penalty. In your case, cash is received from more than one person.

    • Shraddha says:

      Yes it is violation of the provisons of Section 269ST as it will be a single event “marriage”. Same example is given in the above table.

      • Shraddha says:

        Sorry my first reply is incorrect. Its not a violation of provision as the amount is received from a single person in case of marriage event.

  9. Ca. Anjali Lodha says:

    Informative and all at one place

  10. Ramesh Kumar Thakur says:

    4 Withdrawal of cash from Bank account As 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. – -income-tax-provisions-entering-cash-transactions.
    kindly elaborate – about withdraw from government ——- what about Deposit more than two lac in govt sect.

    • Shraddha says:

      As per Press Release as mentioned above, you can withdraw cash from Govt sectors. There is no penalty. But for cash deposit in Govt sector will attract Sec 269SS and not Sec 269ST. Govt companies are exempt from such applicability of sec 269SS. So no penalty in that case too.

  11. Devanshi says:

    Great initiative Shraddha..Keep guiding us..!

  12. Dilen Hindocha says:

    Very informative article.

  13. Raj Kumar says:

    can we receive below Rs.10000/- daily(number of days in the whole year) from single buyer against our one single sale Bill or against number of sale bills ?

    • Shraddha says:

      You can receive cash from single bill or multiple bills from single buyer upto Rs.2 lakhs. Above 2lakhs attracts penalty. Check examples quoted in the table.

  14. Pankaj says:

    I am grain merchant . Can I pay in cash more than 2 lakh to a single farmer ?

    I am asking bcs of 269SS .

    Exemptions from section 269SS: The Following persons are exempted from the purview of section 269SS:

    a) Government ;
    (b) any banking company, post office savings bank or co-operative bank ;
    (c) any corporation established by a Central, State or Provincial Act ;
    (d) any Government company as defined in section 617 of the Companies Act, 1956
    (e) other notified insititutions
    (f) where the depositor and the acceptor are both having agricultural income and neither of them have any taxable income.

    • Shraddha says:

      Your answer is covered in your own question. You have stated the exception to the Section 269SS. As per the last clause to this exception, if both borrower and lender are having agriculture income and neither of them has any income chargeable to tax, then provision of Section 269SS shall not apply.

  15. Mona says:

    Nice article👌🏻

  16. Nirmal Jain says:

    How much maximum amount can receive in cash donation by NGO

    • Shraddha says:

      That will be covered in Sec 269ST limit of Rs. 2 lakhs. At present, there is no exemption given under this section to trusts or NGOs. So till the time CG notifies, it will be governed by Section 269ST as per my view.

  17. Kiran Kothari says:

    Nice article

  18. EssGee says:

    Whosover is writing on these aspects always forget to mention the time!

    • Shraddha says:

      I have mentioned the dates of recent amendments. Please check it and if you want to know the applicability(from which F.Y.) of a particular provision, you can ask about it.

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