Important provisions related to restrictions on cash transactions under Income Tax Act

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1. Taking or accepting certain loans, deposits and specified sum [Section 269SS]

  • No person is permitted to accept an amount (or aggregate amount) of Rs. 20,000 or more in cash for any loan or deposit or any specified sum.
  • 'Specified sum’ means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property.
  • The amount or the aggregate amount shall include any cash received earlier and remaining unpaid.
  • There are certain exceptions to this provision. These are sums of the aforesaid nature accepted by-

(a) the Government;

(b) any banking company, post office, savings bank or co-operative bank;

(c) any corporation established by a Central, State or Provincial Act;

(d) any Government company as defined in

(e) Section 2(45) of the Companies Act, 2013;

(f) notified institution, association or body or class of institutions, associations or` bodies.

  • The provision is also not applicable if the payer and the payee are both having agricultural income and neither of them is chargeable to income tax.
  • Consequences of violation [section 271D]: Penalty of an amount equal to the amount taken in cash will be levied.

.2. Other Cash Transaction [Section 269ST]

  • No person is allowed to receive in cash an amount of Rs. 2,00,000/- or more-

(a) in aggregate from a person in a day; or

(b) in respect of a single transaction; or

(c) in respect of transactions relating to one event or occasion from a person.

  • This provision does not apply to-

(i) any receipt by Government or any banking company, post office savings bank or co­operative bank;

(ii) transactions of the nature referred to in section 269SS;

(iii) notified persons or class of persons or receipts.

  • Consequences of violation [Section 271DA] : penalty of an amount equal to the amount of such receipt will be levied.

3. Acceptance of payment through prescribed electronic modes [Section 269SU]

  • Every person, carrying on business and having total sales/turnover exceeding Rs. 50 crores in a financial year is mandatorily required to provide facility for accepting payment through prescribed electronic modes or other electronic modes.
  • Consequences of violation [Section 271DB] : A failure to do so, would attract a penalty of Rs. 5000/- for every day during which such failure continues.

4. Repayment of certain loans or deposits [Section 269T]

  • No branch of a banking company or a cooperative society and no other company or cooperative society and no firm or other person is permitted to repay any loan or deposit or any specified advance received by it in cash if such amount (or the aggregate amount) together with interest is Rs. 20,000/- or more.
  • `specified advance’ means any sum of money in the nature of advance, by what ever name called, in relation to transfer of an immovable property, whether or not the transfer has taken place.
  • The aggregate amount shall include amounts held by the person in his own name or jointly with other person on the date of such repayment.
  • There are certain exceptions to this provision. The above provisions shall not apply to repayment of any loan or deposit or specified advance taken or accepted from –

(a) Government;

(b) any banking company, post office savings bank or co-operative bank;

(c) any corporation established by a Central, State or Provincial Act;

(d) any Government company as defined in Section 2(45) of the Companies Act, 2013.

(e) notified institution, association or body or class of institutions, associations or bodies.

  • Consequences of violation [Section 271E]: Penalty for an amount equal to the amount of such loan or deposit or specified advance so repaid will be levied.

5. Disallowance of expenses incurred in Cash [Section 40A(3)] & Deemed Income of business or profession if expenditure is incurred in one year and payment is made in cash in subsequent year [Section 40A(3A)

  • If a person incurs any expenditure for his business or profession, in respect of which payment or aggregate of payments made to a person in a day in cash exceeds Rs. 10,000/-, no deduction is allowed in respect of such expenditure.
  • If an allowance has been made in respect of any liability incurred by a person for any expenditure, and later during any subsequent year the person makes payment in respect thereof, in cash, the payment so made is deemed to be Profits and Gains of business or profession and is chargeable to income-tax as income of the subsequent year, if the payment or aggregate of payments made to a person in a day exceeds Rs. 10,000/-.
  • Exceptions to the above are provided in Rule 6DD of the Income Tax Rules, 1962.
  • In case payment is being made for plying, hiring or leasing goods carriages, then the aforesaid limit is Rs.35000/-.

6. TDS on Payment of Certain amounts in cash [Section 194N]

  • TDS @ 2% is applicable on cash withdrawals above Rs. 1 crore.
  • However, in case of a person who has not filed returns of income for the past three assessment years relevant to three previous years for which time limit to file return u/s 139(1) has expired the applicable TDS rate is 2% on cash withdrawals in excess of 20 lakhs and upto 1 crore and 5% on cash withdrawals above Rs. 1 Crore.

Disclaimer :

The purpose of this blog is for education purpose and should not be construed as professional advice. Views expressed herein are the personal views of the author. Government or judicial authorities may or may not subscribe to the views expressed herein. Author of the blog is not liable for any implications arising out of actions taken based on the views expressed herein.

 

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