Beware of Income Tax provisions before entering into Cash Transactions

In 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.