- June 14, 2023
- Posted by: IBA LLP
- Category: Articles, Direct Tax
Transactions in cash often go unaccounted and this is very common practice in India. The government has come up with various measures to curb the same in order to minimize the menace of black money.
Various new provisions have been enacted and amendments have been made to the existing provisions to put an end to or minimize cash transactions. The taxpayer who violates any such provisions are also liable to steep penalties upto 100% of the amount involved.
We will discuss such provisions through this article however before that lets understand the objective of the lawmakers behind enacting these provisions:
- To curb money laundering and tax evasion;
- Encouraging transparent business practices;
- Providing enabling environment for growth of transparent business
- Easing of Audit and Investigation.
Some of the provisions under Income Tax Act which has been enacted with the above objectives are discussed here in:
- Taking or accepting certain loans, deposits and specified sum:
Provisions | Consequences of Violation |
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- Other cash transaction:
Provisions | Consequences of Violation |
a) In aggregate from a person in a day; or b) In respect of a single transaction; or c) In respect of transactions relating to one event or occasion from a person.
1. Any receipt by government or any banking company, post office savings bank or co-operative bank 2. Transactions of nature referred in point |
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- Acceptance of payment through prescribed Electronic Mode:
Provisions | Consequences of Violation |
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- Threshold limit for audit of accounts increased if cash transactions don’t exceed 5%:
Provisions | Consequences of Violation |
a) Aggregate of all cash receipts during the year does not exceed 5% of total receipts; and b) Aggregate of all cash payments during the year does not exceed 5% of the total payments.
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Deduction in respect of Health Insurance Premia:
Provisions | Consequences of Violation |
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- TDS on payment of certain amount in cash:
- TDS @2% is applicable on cash withdrawals above INR 1 crore.
- However, in case of a person who has not file return of income for the past assessment years relevant to three previous years for which time limit to file return has expired ,the applicable TDS rate is 2% on cash withdrawals in excess of INR 20 lakhs and upto INR 1 Crore and 5% on the withdrawals above INR 1 crore.
All these provisions would help in achieve the mission of the government to move towards a cash less economy to reduce generation and circulation of black money.
Disclaimer: All the above stated provisions of law are applicable on the date of publishing this article but are subject to amendments in law. Thus, you are requested to correlate the same with provisions prevailing for the time being in force before applying the same to any practical situation
Author : Neha Srivastava