Say No To Cash Transactions


Established 1993


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AVOID CASH TRANSACTIONS - CONTRIBUTE TO DIGITAL INDIA !

Cash transactions have consistently raised concerns for the tax department, prompting the government to implement periodic measures and restrictions. Non-compliance with these regulations can result in substantial penalties, reaching up to 100% of the transaction amount. Here is a breakdown of specific provisions that individuals should consider when engaging in certain transactions:

A) Cash Payments Under Business/Profession
If a person incurs expenditures for their business/profession, and the payment or aggregate payments made in cash for a transaction to a person exceed Rs.10,000/- in a day, 100% of such payment will be disallowed when computing taxable income. For payments related to plying, hiring, or leasing goods carriages, the limit is Rs.35,000/- instead of Rs.10,000/-. Additionally, expenditures for acquiring assets exceeding Rs.10,000/- in cash in a day are not included in determining the actual cost, leading to no depreciation benefit for such cash-incurred capital expenditures. However, Rule 6DD outlines specific cases and circumstances where expenditures are allowed as deductions even when paid in cash.

B) Cash Receipts Under Business/Profession
No person should receive Rs.2 lakh or more in aggregate from a person in a day or for a single transaction/event without an account payee cheque/draft or other electronic modes. Non-compliance can result in a penalty equivalent to the amount received. Exceptions include receipts by the Government, banking companies, post offices, or cooperative banks, and transactions specified in section 269SS. Reporting under SFT applies if a person is liable for audit under section 44AB of the Income Tax Act.

C) Taking or Accepting Certain Loans or Deposits
Except for specified transactions, no person is allowed to accept Rs.20,000/- or more in cash for loans, deposits, or amounts related to the transfer of immovable property. Any outstanding amount plus subsequent cash receipts must adhere to the overall limit of Rs.20,000/-. Violation can result in a penalty equal to the cash amount received.

D) Repayment of Certain Loans or Deposits
Except for specified transactions, no person is permitted to repay loans or deposits in cash if the total amount with interest is Rs.20,000/- or more. Violation may lead to a penalty equal to the amount repaid.

E) TDS on Cash Withdrawals
To discourage cash transactions, TDS at 2% is imposed on cash withdrawals exceeding Rs.1 Cr by banking companies, cooperative banks, or post offices. Different TDS rates apply based on the recipient's filing of income returns.

F) Tax Audit Applicability on Account of Cash Transactions
For businesses with a turnover between 1Cr to 10Cr, tax audit applies when cash receipts or payments exceed 5% of the total receipts/payments.

G) Other Cash transactions
Deductions under Income Tax are not allowed for donations in cash to a registered trust or political party, in excess of Rs.2,000/-. Deduction under 80D is not allowed for payments made in cash for health insurance premiums. These provisions serve as guidelines for every taxpayer to comply with all the Income Tax Act provisions, ensuring better and cleaner books of accounts. It's worth noting that electronic transactions are easier to prove in case of business disputes and can help avoid errors of omission.

Curated By:

Yash Jain