A Complete Guide Ban of High Value Cash Transaction

There have been restrictions imposed on the cash transactions to promote digitalization in Budget 2017. In this article, we will have a look on the such restrictions as imposed on the cash transaction.

Today in India, the tax evasion had become the common pattern of many people. There are many things that adversely affect the total revenue earned by the government creating the difficulty for various welfare programmes which would be set up by them. One of them is especially the huge amount of Domestic Black Money.

This also creates the meaningless pressure on the genuine tax payers, because generally the black money is used in cash transactions which involves high value. A very large amount of wealth which is not accounted is kept and used for the normal transaction in form of cash.

The biggest decision taken by our Prime Minister Mr. Narinder Singh Modi of demonotization on 8th November, 2016 was only with the main motive, to curb the black money from the India’s society. Due to which now the people with large amount of horded black money found that their cash or notes do not have any value and they are as same as the value of paper. Whereas now the Finance Minister of India Mr. Arun Jatley has also proposed some sections in the Budget 2017 to eliminate the storage of cash to curb black money.

#New Section 269ST- limitations on Cash Transaction.

As per section 269ST which is applicable from 1st April, 2017

  1. A person cannot accept an amount of Rs.2 lakh or more in aggregate from another person in the same day against single bill or against different bills.
  2. Even on the different days also, a person cannot accept an amount Rs.2 lakh or more for a single transaction.
  • For the transactions related to one event or occasion also, a person cannot accept Rs.2 lakh or more from another person.

But these all transaction are possible with the electronic clearing system and the banking method like Draft, Cheque etc.

The transaction referred to in Section 269SS will excluded from the scope of the New Section 269STwhich is attracted when we accept loan from any person.

This section is not applicable to

  • Government
  • Co-operative Bank
  • Banking Companies
  • Post Office Saving Bank
  • Other Person’s/ Receipts as May Be Notified

Examples related to this are given below;

  1. In a case, a person sold goods of Rs.6,00,000 through the different four bills each bill of Rs.1,50,000 and each to one single person and receives the cash in the one single day at different period of time then this will be the violation of the Section 269ST (a).
  2. In a case, a person sold goods of Rs. 600,000 on a single bill to the second person and accepts the cash of Rs.3,00,000 on 1st day and then on another day receives cash of Rs.3,00,000, this is also the violation of Section 269ST (b).
  3. Rajiv gets the order of Food, Decorating and Music etc to do the arrangement for the birthday event of Miss. Ruchi and also accepts the order . For this he gets the cash of Rs.1,50,000 for the arrangement of Catering and Rs. 200,000 for the decoration and also Rs. 150,000 for music. So as per section 269ST (c), it is the violation of the section even if he had accepted the cash on different dates because the bill drawn here are related to the same event i.e. birthday of Miss. Ruchi.

In all of the 3 above mentioned cases, Section 269ST is violated and the penalty imposed against it under section 271DA will be applicable.

# Under Section 271DA- 100% Penalty for high value Cash Transactions 

This section has been inserted in the budget 2017. As per section 271DA, if any person violates section 269ST then he has to a 100% penalty. Here 100% means the full amount equal to the amount of transaction transacted or cash received. The above said penalty will be levied by the Joint Commissioner.

#Other amendments for rigid cash policy

In case of purchase of Jewellery in cash

Section 206C is also amended.

Earlier Provision: There should be tax collected at source @ 1% of sale consideration on cash sale of Jewellery exceeding five lakh rupees.

Amended Provision: In case of any cash sale of more than Rs.2 lakh, penalty will apply on the spot. Penalty will be 100% of the value of transaction. So, it is that if one pays cash of three lakh rupees, he promptly becomes bound for penalty. The need of tax collection at source is required.

Other cases where TCS is applicable

In a case where a person pays any amount on which TCS is applicable under section 206C i.e. sale of liquor, scrap, forest produce, timber, coal etc, then he has to provide his PAN to the seller collecting TCS. If PAN is not provided then the TCS shall apply at the rate of:

  • Double the rate mentioned OR
  • 5%

Thus, government is trying to put more strict provisions on cash transaction to curb the black money and to make Indian economy a world class economy.

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