Cash Transactions and its consequences

Cash, Cash, Cash ……

I like Cash

But Income tax act don’t like cash

I Should Avoid … 

Story main line:

Mr. Rocky hero of our story likes cash, how much he likes cash as he likes gold in KGF but here is the twist is he likes to spend in Cash.

For doing business he got money as a loan from Inayat Khalil, deposits that money in the bank till he orders the Goods from supplier. For paying the goods he withdraws money from bank account and pay to the supplier.

He sold goods for cash only and again put that money in his bank account till next order.

This is our hero’s business model; you may have many logics why he is depositing and withdrawing money from bank account unnecessarily but the reason is he likes cash……

Here comes to the picture Rao Ramesh, who is observing our hero and his business model from many years. Rao Ramesh preparing a report on our hero business model to report to Ramika Sen.

Let’s see the Report

1. Took a loan in cash – violates the provisions of section 269SS

2. Depositing the cash in bank – Exceeds the limits so bank has to report to govt SFT transaction.

3. Withdrawing the cash for payment, 194N will be applicable

4. While withdrawing more than 50000 – he needs to submit PAN

5. Paying to Supplier in cash – > 269ST will applicable

6. ll other expenses he incurs in cash – 40A (3), 40A(3A) attracts

7. Cash sales – so he cannot opt 6% in case of presumptive scheme

8. Repayment also in cash – 269 T applicable.

Let’s see in details each provision.

S. No.

Section

Particulars

What if violates

1

269SS,ST, T

We will these topics in detail in part2

 —

2

285BA

Deposits in Saving accounts, deposits in current account > 10,00,000 – bank has to report in Form 61A

Nothing Income tax department will know these transactions.

3

194N

If withdraw from banks, P.O Exceed

20 Lakhs – (If Preceding 3 years ROI not filled)

 1Crore – (If preceding 3 years ROI filled)

TDS deducted by bank @ 2% – (>20L – 1 Cr)

@ 5% – (>1Cr)

4

 

If amount withdraw from bank > 50000/day or > 20Lakhs per year – PAN card has to be submitted to the bank.

 

5

40A(3),40A(3A)

Expenses or payments spent in cash if > 10000

If payments plying, hiring or leasing of goods carriages > 35000

Such Expenses disallowed

6

Cash sales

There is a benefit in case of presumptive taxation assesses if sales are not in cash, then he can report his income as 6% instead of 8%.

 

Author Bio

Qualification: CA in Job / Business
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Location: Yanam, Andhra Pradesh, India
Member Since: 03 Jan 2020 | Total Posts: 2
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