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Home » Income Tax » Restrictions And Implications On Cash Transactions Under Income Tax Act W.E.F. 01-04-2017

Restrictions And Implications On Cash Transactions Under Income Tax Act W.E.F. 01-04-2017

 

 

In Budget 2017, the Government has put many restrictions on entering into cash transactions between various parties. Following is the list of such transactions and implications thereon.

 

 

S.N. Nature of Transactions Restrictions and Limits Imposed Implications of crossing the limits
1 Payment made for any expenses [Section 40A(3)] Upto Rs. 10000/- per person per day If payment made to per person per day exceeds Rs. 10000/-, then total expenditure will be disallowed in Income Tax Act

For making payments to transporters, Rs. 35000/- is the limit instead of Rs. 10000/-

 

E.g.: If you make payment of Rs. 15000/- towards Car service in a day and want to claim it as business expenditure, such expenditure will not be allowable.

 

2 Payment made for Purchase of Assets [Section 43(1)] Upto Rs. 10000/- per person per day If payment made to any person per day exceeds Rs. 10000/- then such cash payment will not be included in cost of assets for the purpose of calculating depreciation.

 

Eg. : If you purchase a Car and pay booking amount of Rs. 21000/- in cash, then such Rs. 21000/- will not be included in cost of assets for the purpose of claiming depreciation.

 

3 Payment of Medical Insurance Premium [Section 80D] If paid in cash, no deduction will be allowed. If you pay medical insurance premium through cash, then no deduction will be allowable u/s 80D.

 

 

4 Payment towards donation [Section 80G] If amount exceeding Rs. 2000/- is paid in cash, no deduction is allowable If you pay donation exceeding Rs. 2000/- in cash, then deduction u/s 80G cannot be claimed in respect of such donation.

 

5 Receipt of payment towards any transaction [Section 269ST] No amount can be received from any person exceeding Rs. 1,99,999/- If any person receives amount exceeding Rs. 1,99,999/- in cash in following cases

 

–          from a person in a day

–          in respect of a single transaction

–          in respect of transaction to one event or occasion

 

Penalty equal to amount received will be levied on such transaction.

 

E.g. :

–  Receipt of payment in cash of a single invoice of Rs. 200000/- or more (even individual payments received are less than Rs. 10000/- per day)

–  Receipt of cash from partnership firm

–   Receipt of cash for any personal transaction.

Amit Mundhra FCA

Author is a fellow member of the ICAI and he can be contacted at amit.mundhra@gmail.com

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One Responseso far.

  1. Rahul Agarwal says:

    Thanks for updating.

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