Cash Transactions: Here Are The Limits And Penalties Under The Income Tax Rules
Cash transactions have traditionally played a significant part in the Indian economy and are a persistent cause of the accumulation of black money. The government has set various limits on cash transactions from time to time in order to combat black money.
Paying or receiving cash in excess of these limits is punishable by a steep penalty of up to 100 percent of the amount paid or received.
Let's take a look at some of the cash transactions that may have serious consequences:
India's income tax laws prohibit cash transactions in excess of Rs 2 lakh for any reason. For example, if you are purchasing gold jewellery worth Rs 3 lakh in a single transaction, you must make payment via cheque, credit card, debit card, or bank transfer.
Even if you receive money from any family member, you must follow this guideline. To limit the usage of cash in high-value transactions, the government, under Section 269ST, prohibits anyone from accepting cash worth more than Rs 2 lakh. This means that in a single day, an individual cannot accept more than Rs 2 lakh in cash even from close relatives.
One cannot accept even a cash gift of more than Rs 2 lakh from a single donor on a single occasion. Those who accept cash in excess of Rs 2 lakh in violation of this clause may face a penalty equivalent to the amount received.
Make sure you don't pay for health insurance in cash while tax planning. If a taxpayer pays their insurance premium in cash, they are not eligible for the Section 80D deduction. It is required to be done through the banking system.
If a person takes a cash loan from a financial institution or a friend, the total amount cannot exceed Rs 20,000. The same regulation applies to debt repayment. The repayment of a Rs 20,000 loan must be made through a financial channel.
In a property transaction, the maximum cash allowed is also Rs 20,000. The limit remains the same even if a seller accepts an advance.
When it comes to self-employed taxpayers, they cannot claim any expenditure over Rs 10,000 if it's paid in cash to a single person in a single day. The law establishes a higher threshold of Rs 35,000 for payments given to a transporter.
