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2017

Do not pay cash for certain transactions

  • The government has introduced new section 269ST in Income Tax Act 1961 for prohibition of acceptance of cash of Rs 2 lakh and more.
  • For cash transactions above that limit, the receiver will need to pay a penalty equivalent to the amount of transaction. There are no exceptions to this.
  • You cannot gift cash to close relatives (children, parents and spouse) above Rs 2 lakh and even on the occasion of marriage; you cannot accept a higher amount of cash as a gift.
  • At present, there are few other areas which have either a cap on cash transaction or a complete ban. Here are those transactions and the penalty that may attract for flouting the rules...
Sr. No. Income Tax Act Section Cap on cash transaction Cap on cash transaction Penalty for cash transaction
1. 269ST- Prohibition on receiving cash Rs. 2,00,000 or more 100% of amount received
2. 40A(3)- Disallowance for cash expenditure
  • Payment of any expenditure above Rs. 10,000
  • Payments for plying, hiring or leasing of goods carriage above Rs 35,000
No deduction
3. 43(1)- Determination of actual cost of asset Payment above 10,000 for purchase of asset Such payment won't be included in actual cost of asset (viz, No depreciation)
4. 35AD- Investment linked deduction for capital expenditure Payment above Rs 10,000 for any capital expenditure No deduction
5. 80D- Health Insurance premium No cash payment allowed No deduction
6. 80G - Donations to certain funds and charitable institutions Donations above Rs. 2,000 No deduction
7. 80GGA- Donations for scientific research or rural development Cash donation above Rs. 10,000 No deduction
8. 80GGB - Donations by companies to political parties No cash payment allowed No deduction
9. 80GGC - Donations by any person to political parties No cash payment allowed No deduction
10. 269SS- Prohibition on acceptance of cash loans, deposits, etc. Rs. 20,000 or more 100% of amount received
11. 269T - Prohibition on repayment of loans or deposits in cash Rs. 20,000 or more 100% of amount paid
12. 13A -Exemption to political parties Receipt of cash donation above Rs 2,000 No exemption

Conditions:

The section 269ST seeks to cover following three major transactions i.e Prohibition on receipt of following otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account.
  • Receipt of Rs 2 Lakhs or more from a person in a day in the aggregate
  • Receipt of Rs 2 Lakhs or more in respect of a single transaction
  • Receipt of Rs 2 Lakhs or more in relation to one event or occasion from a person
Financial Management