In the Indian economy, cash transactions have always assisted a significant role and are a consistent reason for accumulating black money. Therefore, the government has recently initiated various measures to curb cash transactions and boost digital payments.
To curb black money, the government has urged several restrictions on cash payments from time to time.
Expenditure made in cash
Cash payment exceeding Rs 10,000 to a person in a single day. The limit is expanded to Rs 35,000 if the payments are being made for plying, hiring or leasing goods carriage to a person in a single day.
The whole amount of such expenses shall not be permitted as the assessee’s deduction when estimating income under Profit & Gains from Business or Profession. No extra penalty is urged on the payer or receiver.
Restriction on donation in cash
The donation exceeding Rs 2,000 in cash to definite funds, charitable institutions etc.
The maximum deduction amount shall not exceed Rs 2,000 for donations made in cash. No additional penalty is imposed on the payer or receiver.
Restriction on receiving cash
No person shall receive an amount of Rs 2,00,000 or more:
· In aggregate, from a person in a day (even against different bills)
· In respect of a single transaction (even on different days)
· In consideration of transactions relating to one event or occasion from a person
Sum equal to the amount of such receipt shall be accountable to be paid by the receiver as the penalty under Section 271DA of Income Tax Act. However, no sanction shall be imposable if such a person proves good and sufficient reasons for the infringement. Also, the penalty is urged on the receiver, not on the payer.
Restriction on taking or accepting loans, deposits and specified sum
No person shall carry or get any loan, deposit and specified sum from any other person in cash, if:
· The amount of such loan, deposit or a fixed sum, or the aggregate amount of such loan, deposit, and the defined sum of Rs. 20,000 or more.
· On the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or identified sum is taken or received earlier by such person from the depositor is prevailing unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unsettled is Rs. 20,000 or more.
· The amount or the aggregate amount mentioned to in clause (a) together with the amount or the aggregate amount referred to in clause (b) is Rs. 20,000 or more.
Sum equal to the amount of such loan or deposit or specified sum taken or accepted shall be accountable to be paid by the receiver as the penalty under Section 271D of Income Tax Act. The penalty is urged on the receiver, not on the payer.
Restriction on repayment of loan, deposits and designated advance
No person shall reimburse any loan, or deposit with it or any specified advance in cash, if:
· The amount of the loan or deposit or identified advance together with interest, if any, payable thereon, is Rs. 20,000 or more.
· The aggregate amount of the loans or deposits held by such person on the date of such recompense together with interest, if any, payable on such loans or deposits, is Rs. 20,000 or more.
· The aggregate amount of the specified advances collected by such person either in his own name or mutually with any other person on the date of such repayment at the time with interest, any, is Rs. 20,000 or more.
Sum equal to the amount of such loan or deposit or identified sum so reimburse shall be liable to be paid by the payer as the penalty under Section 271E of Income Tax Act. The punishment is urged on the payer, not on the receiver.
Exemptions of cash transactions
This section shall apply to compensation of any loan or deposit, or specified advance has taken or accepted from:
Any banking company, post office savings bank or cooperative bank
Any corporation created by a Central, State or Provisional Act
Any government company
Such other institutions, associations or body or class of institutions, associations or bodies that the Central Government needs to be recorded in writing, notify in the behalf of the official Gazette.
At Itseki Mercurius India, we assist our clients with various income tax compliances, including income tax assessments, TDS returns, ITR filings, tax advisory and other related services by providing them adequate support and guidance from our end. If you have any questions or wish to know more about section 194P, kindly contact us.