Receipt or Payment In Cash (Cash Transactions) under Income Tax Act

As we all know about the section 269ST, which was introduced by the Central Government in the Income Tax Act, 1961 by the Finance Act, 2017, to curb tax evasion, regulation and circulation of black money.

1. Basic Understanding of Section 269ST

As per section 269ST, any person who enters into a transaction of Rs 2 lakh or more in cash will be liable to a penalty of an amount equal to the amount of the transaction.

For example: If you buy an expensive watch for cash of Rs 7 lakh, then it is the shopkeeper who will have to pay tax (penalty) of Rs 7 lakh. So, the tax rate here is 100%.

While this new section on the limits of cash transactions seems simple, we need to know about it in detail, as I believe it can have a significant impact on our daily financial lives.

2. What does Section 269ST say?

With effect from April 1, 2017, no person will receive an amount of Rs 2 lakh or more;

(A) one person a day (or)

(B) in relation to a single transaction (OR)

(C) In relation to a transaction relating to an event or occasion from a person.

The new cash transaction limit does not apply if a person pays an account payee check (or) account payee bank draft (or) through a bank account or through another electronic mode through the use of an electronic clearing system ) Receives the amount through. Determined.

3. Non-applicability of section 269ST

(i) any receipt by

Government;

(B) any banking company, post office savings bank or cooperative bank;

(ii) Transactions of the nature mentioned in Section 269SS;

(iii) Such other person or persons or class of receipts as the Central Government may by notification in the Official Gazette specify.

4. Penalty under Section 271DA:

Please note that the penalty U / S 271DA will be levied on a person who receives Rs 2 lakh and above in cash. There will be an amount of penalty equal to the amount of such receipt. The said penalty however will not be levied if the person proves that there were good and sufficient reasons for such violation. Further please note that this fine will be levied by the Joint Commissioner.

5.  Other Important Points on Section 269ST

• Based on my interpretation of Section 269ST, payment modes like Bearer Cheque and Self-cheque will also be treated as equivalent to cash based transactions only.
• It is clearly stated that the penalty (if any) is chargeable to a person who violates Section 269ST even if you do not have PAN and / or tax assessor.
• Restrictions on receipt of money in cash amount of Rs 2 lakh or more, whether applicable for personal / business purpose, capital or revenue in nature, tax-free or taxable income.
• Please note that the payer of the money is not liable to pay any penalty, it is the receiver of cash which has to bear the penalty U/s 271DA.
• Cash donation of not more than Rs 2,000 is not allowed (donation can be claimed u / s 80G)
• Premium insurance cannot be claimed on health insurance policies paid in cash which is 80D.
• Loans or deposits of 20,000 or more in cash cannot be repaid.
• The payment of more than Rs 10,000 per person cannot be made towards any commercial payment for any expenditure (or) purchase of capital assets.
• One should not consider loan or deposit or sale in cash Rs. 20,000.

6. Restriction on Capital Expenditure for Business in Cash above Rs. 10000/- [Section 43(1) and Section 32]:

Where an assessee incurs any expenditure for the acquisition of an unqualified property in respect of which a payment (or total of payments made to a person in a day), otherwise the account payment is paid through check / draft or electronic clearing system. Through bank account or such other electronic mode as may be prescribed, Rs. More than. 10000/-, such payment will not be eligible for general / additional depreciation under section 32.

7. Reduction in the limit of Cash Payment to Rs. 10000/- in a Day

[Section 40A(3) & 40A(3A) of the Income Tax Act, 1961:

The monetary limit on revenue expenditure in cash has been reduced from Rs. 20,000 to Rs. 10,000 (There is no change in the monetary limit related to cash payments up to Rs. 35000 / – for Transport contractors). There are also some exceptions to Rule 6DD of the Income Tax Rules. Consequently, any expenditure in connection with the payment (or the aggregate of payments made to a person in one day), otherwise using an account payer check / draft / electronic clearing system through a bank account or through such other electronic mode Can do with Has been determined, Rs. More than. 10000 / -, no deduction will be allowed in respect of such payment under sections 30 to 37 of the Income Tax Act, 1961.