Say No to Cash Transaction.

Say no to Cash 1

Say No to Cash Transaction. Know about the Cash Limit under the Income Tax Act.

Due to digitalization, our economy is moving towards cashless transactions. This is a foolproof system that eliminates tax evasion and gives a clear picture of the cash transactions. Many new provisions are introduced by the Government for putting restrictions on unusual cash transactions and to boost the digital payments.

We will discuss the important provisions of cash transaction limits and allowance/disallowance under the Income Tax Act.

Say No to Cash

 

    1. Maximum of Rs. 10,000/- only allowed for Cash expenditure U/S 40A(3):

As per section 40A(3) of the Income Tax Act, Rejects cash payments over Rs. 10,000/- for any expenditure. It is necessary for all taxpayers to make any cash payment for expenses valued above Rs. 10000/- only through banking channels like debit card, cheque or NEFT

   2. Disallowance of Capital Assets and depreciation valued above Rs. 10,000/- U/S 43:

As per the provision of section 43 of Income Tax Act, Any payment over Rs. 10,000/- is made for the purchase of Assets by cash will be disallowed and the depreciation and investment allowance to such payment cannot be claimed.

   3. Deduction not allowed of Health Insurance Premium u/s 80D:

As per the provision of section 80D of Income Tax Act, No cash payment is allowed for health insurance premium, Under Chapter VI A is allowed only if the premium is paid for deduction done through bank channels. An exception of Cash Transaction in preventive health check-up is allowed up to Rs. 5000/-.

  4. Donation over Rs. 2,000/- in cash disallowed u/s 80G:

As per the provision of section 80G of Income Tax Act, the donation is made for sums exceeding Rs. 2,000/- is disallowed. If the taxpayers want a deduction under Chapter VI A of 80G, a donation valued above Rs. 2000/- should be paid through banking channels.

  5. Disallowance of Donation paid to Political Party u/s 80GGB:

As per the provision of section 80GGB of Income Tax Act, Cash contributions are not allowed therefore, the respective contributions to political parties must be made through other modes of payments such as Cheque, Demand Draft, or Electronic Transfer.

  6. Acceptance of Cash loan or Deposits u/s 269SS:

As per the provision of section 269SS of Income Tax Act, all loans or deposits of more than Rs. 20,000/- should be done through other modes of payment than cash.

Some Exception:

  • Government;
  • Any banking company, post office saving bank or co-operative bank;
  • Any corporation established by a Central, State or Provincial Act,
  • Any Government company as defined in clause (45) of section 2 of the Companies Act, 2013
  • An institution, association or body or class of institutions, associations or bodies notified by the Central Government in the official gazette.

  7. Repayment of a Cash loan or Deposits u/s 269T:

As per the provision of section 269T of the Income Tax Act, we cannot repay any loans or deposits together with interest of more than Rs. 20,000/- should be done through other modes of payment than cash.

Some Exception:

  • Government;
  • Any banking company, post office saving bank or co-operative bank;
  • Any corporation established by a Central, State or Provincial Act,
  • Any Government company as defined in clause (45) of section 2 of the Companies Act, 2013
  • An institution, association or body or class of institutions, associations or bodies notified by the Central Government in the official gazette.

   8. No person can receive an amount of Rs.2 Lakhs or more in cash u/s 269ST:

As per the provision of section 269ST of Income Tax Act, Cash receipt is not applicable if the amount of Rs. 2 lakhs or more received in aggregate by a person in a single day as Single Transaction or transaction relating to one event or occasion.

Some Exception:

  • Government;
  • Any banking company, post office saving bank or co-operative bank;
  • Any corporation established by a Central, State or Provincial Act,
  • Any Government company as defined in clause (45) of section 2 of the Companies Act, 2013
  • An institution, association or body or class of institutions, associations or bodies notified by the Central Government in the official gazette.

Happy Reading

Sumathy Saravanan

 

 

 

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