Overview

Cash transactions, which were free for everyone (sometimes free to be exploited) are now in check. There’s a threshold limit to the transactions and the law would penalize who breaks it. The penalty is very heavy and could be up to 100% of the transaction. This initiative was carried out to curb black money transactions in the nation. The law is being vigilant towards the nation’s resources and this is highly appreciated.

There are multitudes of ways through which a person might use his/her black money, which is why the judiciary has passed some laws to keep it in order.

Cash Payments

Section 40(A)

This section pertains to Cash transaction payments made in cash. Under this section, if the expenditure increase over Rs.10,000, then it will not be allowed under the Income Tax Act.

Section 43

Under this section, if the cash transaction made to acquire an asset exceeds Rs.10,000, the transactions would be disallowed to check the actual value of the asset. So, to make your job easier while acquiring an asset, why not go for Bank transactions?

Cash Receipts

Cash transactions under Section 269ST

A new section was inserted to curb black money i.e. section 269ST. Under this section, any receipts that exceed Rs. 2 lakh would be penalized if:

  1. If a person receives more than Rs. 2 lakh in aggregate from a person in a day; or
  2. If a person receives more than Rs. 2 lakh from a single transaction
  3. In case of an event or cash transactions received from a single person

Exemptions

  • If the Cash is received through an Account Payee Cheque or an Account Payee Bank draft or by using an electronic clearing system (ECS) through a bank account.
  • If the cash is received from the Government/any banking company/post office savings bank/co-operative bank.
  • Refer to the transactions in section 269SS
  • If the person/class of persons has a notification by an Official Gazette.

Section 269ST also classify some cash transactions that need to be curbed. These are

Post Office withdrawals

The limit of cash withdrawals from the post office or an ATM that puts a person under the radar is Rs. 25,000 per day and Rs. 10,000 per transaction. This section allows first 5 transactions free of cost and GST and Rs.20 are charged from the 6th transaction.

In metro cities, the ATMs transaction is free up to 3 and in non-metro cities, it is up to 5.

Bank Withdrawals

Your deposited amount could be collected from savings and current account via cheque book/withdrawal slip or through debit card using ATM.

The limit, in this case, varies from bank to bank. It could be Rs.10,000 to Rs.50,000 depending upon the bank. The nation’s biggest and globally operating SBI bank has the following details on the withdrawals

  1. Withdrawals via cheque book are limited by up to 60 transactions in a year.
  2. Withdrawals using current account is limited to Rs. 1 lakh per week and from saving account is limited to Rs. 24,000 per week.
  3. ATM withdrawals have a threshold limit of Rs.10,000 per day and permit unlimited free transactions for salary account, whereas 3 transactions from other ATMs are allowed with a fee of Rs.20 plus GST per month.

Penalty

Under section 271DA, failure to comply to section 269ST could lead to a penalty of an amount equal to the amount withdrawn.

Cash transaction under Section 269SS

Under this section, any person who’s a taxpayer has to check whether before receiving/accepting a loan or a deposit or a sum of more than Rs.20,000 in cash. Proper banking channels have to be opted to make such cash transactions.

Exemption

The exempted parties from this section of the Income Tax Act are:

  1. Government
  2. Any banking company, post office savings bank or co-operative bank;
  3. Any corporation established by a Central, State or Provincial Act
  4. Any Government company falls under clause (45) of section 2 of the Companies Act, 2013
  5. The institution, association or body or class of institutions, associations or bodies notified by Central Government in its official gazette
  6. Last but not least, any person who’s taking/accepting the loan and the person who’s giving/making a loan has agriculture business and so are not liable to pay tax under the income tax act.

Must read: How to file for income tax online

Penalty

Those who do not comply with this section could be liable to pay an amount equal to the loan deposited or specified sum accepted in the cash transaction.

Repayment of loan

Cash transaction under Section 269T

Under 269T, any branch of a banking company or a co-operative society, firm or any other person cannot repay loan or deposit otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person, who has made the loan or deposit, if:

  • The amount of the loan and interest is INR 20,000 or more; or
  • The aggregate amount of loan deposits and interest accrued held by a person, jointly with another person equals to INR 20,000 or more

Exemptions

Refer to points 1,2,3 and 4 under Section 269SS exemptions.

Penalty

In case of failure to comply with section 269T, the penalty could be equal to the amount of loan or deposit repaid is payable.

 

For more information regarding section 269SS and 269T, you can follow our blog. Our Experts will help you with the services such as ITR filing, GST registration, and GST returns filing. You can also buy our GST software and ITR software. Hurry up! visit our website: LegalRaasta. Apply today by giving us a call at +91 8750008585 and send your query on Email: [email protected]

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