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.
– 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 firstname.lastname@example.org