a) Legal Measure Applicable to Receipt of Money

i. Section 13A : Exemption for certain income of political parties

No donation exceeding Rs.2000 is received by such political party otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account[or through such other electronic mode as may be prescribed]

Contravention : Exemption u/s 13A shall not be allowed.

ii. Section 269ST & 271DA: Mode of undertaking transaction

Surgical Strike on Cash Transactions

NO PERSON (Except banking company, Govt., post office,  co-operative bank & CG notified person) shall receive an amount of RS.2 LAKHS OR MORE otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account[or through such other electronic mode as may be prescribed]

  1. in aggregate from a person in a day (SAME PERSON); or
  2. in respect of a single transaction (SAME TRANSACTION); Or
  3. in respect of transactions relating to one event or occasion (SAME EVEN/OCCASION) from a person

Contravention: Penalty u/s 271DA = 100% of transaction amount.

iii. Section 296SS & 271D :  Mode of taking/accepting loans/deposits/specified sum

  • No person (except banking company, Government, post office, co-operative bank & CG notified person) shall take or accept from any other person, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account[or through such other electronic mode as may be prescribed]
  • Any Loan/any Deposit/any Specified Sum for transfer of immovable property (eg. Advance for transfer of immovable property)(L/D/S) if:
    1. The amount of such L/D/S or aggregate of such L/D/S; or
    2. On the date of taking such L/D/S, any L/D/S taken earlier from the depositor is remaining unpaid; or
    3. The amount or aggregate amount referred to in (a) & (b) exceeding Rs.20,000

Contravention: Penalty u/s 271D equal to Loan/Deposit taken or specified sum accepted.

iv. Section 269SU & 271DB : Acceptance of payment through prescribed electronic modes.

Every person, carrying on business to provide facility for accepting payment through the prescribed electronic modes, in addition to the facility for other electronic modes of payment, if any, being provided by such person, if his total sales, turnover or gross receipts in business turnover or gross receipts in business during the immediately preceding previous year.

Contravention: Penalty u/s 271DB, is Rs. 5,000, for every day during which such failure continues

v. Section 43CA : Stamp duty valuation for transfer of L&B held as stock-in-trade

For the purpose of Sec. 43CA, where date of agreement is not same as date of registration,  SDV on the date of agreement shall be considered if the consideration or part thereof is received other than cash on or before the date of the agreement for transfer.  Else, SDV on date of registration shall be considered.

If Value adopted for the purpose of stamp duty payment ≤105% of consideration received/ accruing , then FVOC= consideration received/ accruing.

vi. Section 56(2)(x) : Gift of immovable property

Section 56(2)(x) will be applicable if the following conditions are satisfied;

  1. A person receives an immovable property from any person.
  2. Stamp duty value exceed 105% of consideration.
  3. Difference between consideration and stamp duty >Rs. 50000

If the above condition are satisfied the difference between stamp duty value and consideration is taxable under the head IFOS.

Note: Fourth proviso to section 56(2)(x) has been amended w.e.f the A.Y 2018-19 as per which section 56(2)(x) will not be applicable , if a capital asset is received by a holding company from 100% subsidiary company (and vice versa) provided the transferee company is an Indian company.

vii. Section 50C : Stamp duty valuation

For the purpose of Sec.50C, where date of agreement is not same as date of registration,  SDV on the date of agreement shall be considered if the consideration or part thereof is received other than cash on or before the date of the agreement for transfer. Else, SDV on date of registration shall be considered.

If Value adopted for the purpose of stamp duty payment ≤105% of consideration received/ accruing , then FVOC= consideration received/ accruing.

viii. Section  44AD : Presumptive taxation

If turnover/gross receipts received through mode other than cash before due date of filing ROI u/s 139(1) – 6% of the total turnover/gross receipts shall be deemed to be PGBP  Else, 8% of the total turnover/gross receipts shall be deemed to be PGBP

ix. Section 69D & 271AAC : Amount borrowed/ repaid on hundi

1. Any amount borrowed on hundi from any person or any amount due thereon is repaid to such person otherwise than by an account payee cheque.

2. Deemed Income is amount so borrowed or repaid.

3. Tax on such income shall be levied u/s 115BBE @60% + 25%(surcharge) + 4% (cess)

4. Penalty u/s 271AAC @ 10% of tax u/s 115BBE

b) Legal Measures Applicable to Payment of Money

Section Number Section Heading Kay Points
40A(3)/(3 A) Cash expenditure Sec. 40A(3) is for payment of CY expenditure Sec.40A(3A) is for payment of earlier year expenditure Disallowance of expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account[or through such other electronic mode as may be prescribed] exceeds Rs.10,000 (Rs.35,000 for contractor)
43(1) Actual Cost for depreciation
  • Actual cost of asset shall not include asset in respect of which a payment or aggregate payment is made to a person in a day, otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed] in excess of Rs.10,000.
  • Therefore, depreciation u/s 32 or additional depreciation u/s 32(1)(iia) or investment allowance u/s 32AD shall not be allowed on asset purchased in cash in excess of Rs.10,000.
  •  Further, for the purpose of Sec. 50 [CG in respect of depreciable asset], the actual cost would not include cost of asset purchased in cash in excess of Rs. 10,000.
35AD Deduction for specified expenditure Deduction u/s 35AD shall not be allowed for expenditure in respect of which payment or aggregate payment made to a person in a day, otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed] exceeds Rs. 10,000
80D Deduction for Health insurance. Deduction shall not be allowed u/s 80D in respect of Health insurance Premium, unless payment shall be made any mode other than cash.

Exception: Payment can be made in any mode, including cash, in respect of any sum paid on account of preventive health check-up.

80G Deduction for donation Deduction shall not be allowed u/s 80G in respect of donation made in excess of Rs.2,000, unless such sum is paid by any mode other than cash.
80GGB/

80GGC

Donation to political party/ electoral trust Deduction shall not be allowed unless such donation is paid by any mode other than cash.
80JJAA Deduction in respect of employment of new employees For the purpose of deduction u/s 80JJAA, additional employee cost shall not include emoluments paid otherwise than by an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed]However, this shall not apply in the first year of business.
269T & 271E Mode of repayment of loan/deposits No Company including banking company & its branches, Cooperative banks & its branches, Co-operative societies, Firm or other person (except banking company, Government, post office, co-operative bank & CG notified person) Shall repay otherwise than by an account payee cheque or account payee bank draft drawn or by use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed] if:

a) Such L/D/S repaid together with interest; or

b) The aggregate amount of Loan/Deposits together with interest held by Depositor with the Branch of the above persons, or specified advance together with interest received by such person either in his own name or jointly with any other person on the date of such repayment Exceeding Rs.20,000

 Contravention: Penalty u/s 271E equal to L/D/S repaid.

c) Legal Measures on Huge Withdrawals of Cash

Section Number Section Heading Kay Points
194N Withdrawals in cash from any Account (saving or current account) [FA 2019] Payment from one or more accounts to an account holder in cash by bank/ co-operative bank/ Post office in excess of Rs. 1 crore in the financial year will attract TDS u/s.194N @2% (applicable with effect from September 1,2019)

W.e.f 1st July,2020,TDS at the rate of 2% is required to be deduced if the withdrawer has not filed his tax return for three years and withdrawal during the year exceeds Rs 20 lakhs but less than Rs 1 crore. For withdrawal more than Rs 1 crore TDS at the rate of  5% is required to be deducted.

d) Legal Measures on Deposit of Money and Specific Expenditure

Section Number Section Heading Kay Points
139 Mandatory Furnishing of Return of Income by Certain Person [FA 2019] A person (other than a company or a firm) shall be mandatorily required to file his return of income, if during the previous year, he-

A. Has deposited an amount ( or aggregate of the amounts ) exceeding Rs.1 crore in one or more current account maintained with a banking company or a co-operative bank ; or

B. Has incurred expenditure of an amount (or aggregate of the amounts ) exceeding Rs. 2 lakh for himself  or any other person for travel o a foreign country; or

C. Has incurred expenditure of an amount (or aggregate of the amounts ) exceeding Rs. 1 lakh towards consumption of electricity; or

D. Fulfill such other prescribed conditions, as may be prescribed.

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