When it comes to cash transactions of purchase/sale of jewellery or immovable property etc., there are no restrictions in the eyes of the law. But if the value of a single transaction exceeds Rs. 2 lakh, then the seller cannot accept any cash beyond this limit under the Income Tax Act. It is necessary to know about all such transactions, covered under various Income Tax provisions involving cash.
- Section 269ST-limit of Rs.2 lakhs on receipt of cash by any person: There have been instances where a cash payment is made to a person for transactions against an immovable property, renovation/furnishing of property, sale of gold, marriages, birthday party etc., exceeding Rs.2 lakhs. The transaction for this purpose should be considered as a whole and not just made in a single day. Further, the restrictions apply to the receiver hence acceptance falls within the purview of section 269ST beyond Rs.2 lakhs and the payer is not responsible for exceeding the limit. This is meant to prevent high value cash transactions. Gifts too cannot be accepted in cash beyond this limit. If a person fails to comply with this provisions, he/she shall be liable to a penalty.
- Acceptance and repayment of loan beyond Rs. 20,000: Acceptance and repayment of loan above Rs.20,000 in cash is prohibited. The tax department in such cases, can impose a penalty equal to the amount of loan thus accepted or repaid in cash. The transactions entered with banks, government, Government company or corporation and other government specified entities are exempt from this provision. Furthermore, this limit will apply to each acceptance resulting into making the balance in loan amount exceed Rs.20,000 or for each repayment of any loan if the balance exceeds Rs.20,000 at the time of the repayment, irrespective of the amount of the individual transaction of acceptance or repayment and will not consider each transaction of loan.
- Self employed business expenses paid in cash: Those who are self-employed cannot claim any expenditure if paid for in cash to a person on a single day beyond Rs.10,000. There is an exception to this rule. If the payment is made in cash to a transporter, it will be allowed though paid in cash. That could be towards a revenue expenditure or towards buying a fixed asset. Failure to do so with respect to the fixed asset, the tax-payer will not be able to capitalise the expenditure and claim depreciation on it.
- Disallowance under section 80,80D and 80G: Insurance premium is allowed as a deduction under section 80. But if it is paid in cash, it is not allowed as a deduction. A deduction of Rs. 5,000 is available to a taxpayer, for him as well as his family even if made in cash, for preventive health check-up under section 80D and is within the maximum amount admissible therein. Cash donations made under section 80G are limited up to Rs.2,000. If any person wants to make donations beyond this limit, he/she shall have to make it otherwise than in cash.
Smrutirekha Bhoi