In India, there are a lot of transactions that go unaccounted for, with people often transacting in cash to avoid the government’s radar. To curtail the black money menace, the government has put several limits that individuals and businesses need to adhere to when they transact in cash. Any person who exceeds these limits could pay steep penalties of up to 100% of the amounts in question. Let’s take a look at these limits in detailed.
Under the Provision of income tax law, cash transactions over Rs.2 lakh are strictly prohibited. Hence Let’s Take a look on some of that cash transaction that may have serious consequences:
Section 269ST of the Income Tax Act prohibits any person from accepting cash over Rs.2 lakh from a single person and in a single day, or in respect of multiple transactions received from a single person that relates to a single event or occasion. Instead, the same will need to be paid for through cheque, card payments, or a bank transfer.
When it comes to gifts, any person cannot accept a cash gift exceeding Rs.2 lakh from a single donor and on a single occasion. This rule applies to money received from a person’s relatives as well. Those who accept cash over Rs.2 lakh in violation of this clause may face a penalty equivalent to the amount received.
For businesses, any expenditure in cash exceeding Rs.10,000 paid to a single person in a single day is disallowed as an expenditure. However, for transporters, this limit stands at Rs.35,000.
The government has also laid down limits that taxpayers must follow while paying their medical insurance premiums. All medical insurance premiums are to be paid through any mode other than cash, failing which the taxpayer becomes ineligible to claim a deduction under Section 80D.
In the case of loan repayments, a person cannot accept an amount or make a payment/repayment to an entity or individual exceeding Rs.20,000 in cash under Sections 269SS and 269T of the Income Tax Act. This rule applies to debt repayments as well. Even property transactions have an upper limit of Rs.20,000 for cash transactions, including advances. In a violation, the assessing office can levy 100% of the loan or deposit amount as a penalty.
You can download the booklet from Income Tax Department Say No to Cash Transaction. Click Here to download
HOW TO AVOID THESE PENALTIES
For More Connect with our support team
Call: +91 8902989430, 8114497880 Whatsapp: +918114497880
Disclaimer: The materials provided herein are solely for information purposes. No attorney-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.
