A common man have many doubts regarding cash transactions. Such as How much cash to receive from Customers? When to Say No to Cash? How much cash can be received in a day? What are the restrictions on Cash Receipt under income Tax? Whats the penalty on cash receipt under Income Tax? This article contains all the answers of Cash Received in business.
Section 269ST of Income Tax Act, in order to reduce tax evasion, put restrictions on person from receiving a sum of Rs 2 lakh or more from any person in cash-
- from a person in a day,
- in respect of a single transaction, or
- from a person in respect of transactions relating to a single event or occasion.
Read Also: 15 High Value Transactions traced by Income Tax department
However, the transaction of an amount equal to or greater than Rs 2 lakh is allowed through a bank account payee cheque or an account payee bank draft or through a bank account using the Electronic Clearing System (ECS). Payment by credit card, debit card, net banking, IMPS (Immediate Payment Service), UPI (Unified Payment Interface), RTGS (Real Time Gross Settlement), NEFT (National Electronic Funds Transfer) and Aadhar Pay (Bharat Interface for Money) are included in ECS via a bank account.
Examples regarding section 269ST and cash Receipt limit:
1. BabaTax buys a watch worth Rs 2 Lakh and pays the amount by cash to Mr. Shyamlal on a single day in 5 equal installments of Rs 40,000 each. As Shyamlal accepted cash worth Rs 2 Lakh from a single person and in a single day, section 269ST is applicable in this case. Mr. Shyamlal will be liable for a penalty of Rs 2 Lakh.
2. Mr BabaTax goes through a medical surgery and the hospital charges him a bill of Rs 4 Lakh. R clears the bill in 4 installments of Rs 1 Lakh each on four different dates. However, the cash receipt got by hospital are less than Rs 2 Lakh received on different dates but it is related to a single bill/ single transaction. Here, Hospital will be liable for the penalty. So, splitting of payments over several days will also attract penalty.
Read Also: TDS on Cash Withdrawal w.e.f 1st July 2020- simplified with examples
Penalty for Cash Receipt
In accordance with Section 269ST, any person entering into a transaction of Rs 2 Lakh or above in cash will be liable for a penalty equal to the sum of the transaction under Section 271DA. For example, if you buy item worth Rs 3 Lakh in cash, it will be the shopkeeper who will have to pay the Rs 3 Lakh penalty
Although, if a person can prove that there were good and satisfactory reasons for the contravention then there will be no penalty applied.
Read Also: Income Tax on Cashbacks, Rewards, e-wallet and Online payment
Exemptions to Section 269ST
Section 269ST of the Income Tax Act do not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by-
(a) Government;
(b) any banking company, post office savings bank or co-operative bank ;
(c) any corporation established by a Central, State or Provincial Act ;
(d) any Government company as defined in section in clause (45) of section 2 of the Companies Act, 2013
(e) other notified insititutions
(f) where the depositor and the acceptor are both having agricultural income and neither of them have any taxable income.
Read Also: Cash Transaction Limit in India – cash payment and cash receipt
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The author of above article is Riya Thawani.
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