Cash Transactions under Income Tax Act, 1961
The Income Tax Act, 1961 of India regulates cash transactions to prevent tax evasion and promote transparency. Here’s a detailed look into the key sections relevant to cash transactions as per the Act.
Section 40A(3)
Provision:
- The maximum cash payment to a single person on a single day should not exceed ₹10,000.
- An exception is made for cash payments up to ₹35,000 for expenses related to plying, hiring, or leasing goods carriages.
Allowed Payment Modes:
Payments exceeding these limits must be made through:
- Account payee cheque
- Account payee demand draft
- Electronic clearing system
Exceptions:
No disallowance under Section 40A(3) if the payment is made in specified conditions, such as transactions with government entities or other prescribed cases.
Section 269ST
Provision:
- No person shall receive an amount of ₹2 lakhs or more in aggregate from a person in a day, in respect of a single transaction or in respect of transactions relating to one event or occasion, in cash.
Exceptions:
- This limit does not apply to government bodies, banking companies, post offices, or cooperative banks.
Penalty:
- A penalty under Section 271DA is imposed, which is equivalent to the amount of the cash received in violation of Section 269ST.
Section 269SS
Provision:
- A person cannot accept a loan or deposit of ₹20,000 or more in cash. This is aimed at discouraging the use of cash in high-value transactions to promote transparency and accountability in financial transactions.
Allowed Payment Modes:
Loans or deposits exceeding this amount must be accepted through:
- Account payee cheque
- Account payee demand draft
- Electronic clearing system
Penalty:
- Violation of this section can attract a penalty equal to the amount of the loan or deposit taken.
Conclusion
These provisions under the Income Tax Act, 1961, are crucial for maintaining a transparent financial system and curbing the circulation of unaccounted money. It is imperative for individuals and businesses to adhere to these regulations to avoid hefty penalties and contribute to a more transparent economy.
For any further details or specific cases, it is advisable to consult with a tax professional or refer directly to the Income Tax Act provisions.
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