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S&A Knowledge Series - Cash disallowances under Income Tax

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Attached is the compilation of the various prohibitions under the Income Tax Act which pertain to cash transactions. Please ensure your books comply with this to avoid penal consequences.

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S&A Knowledge Series - Cash disallowances under Income Tax

  1. 1. Page | 1 ` Prohibited Cash transactions under Income Tax Act <<<<<< S&A Knowledge Series Prepared by Ankita Agarwal Assistant Manager (Direct tax) Vetted by Aswani Kumar Partner www.sethspro.com info@sethspro.com New Delhi | Lucknow | Coimbatore
  2. 2. Page | 2 Cash Transactions and Penalty Levy To restraint black money as well as to limit the number and amount of cash transactions, the government prohibited some types of cash payments in the Finance Acts. Transactions Limit Penalty Exemption (if any) As Per Sec. 269SS, A person should not take or accept loan/deposit/any specified sum from other person otherwise than by the Account payee cheque, demand draft, online transfer through bank account or any other electronic mode as may be prescribed Not a single rupee if the balance in the loan amount is greater than Rs. 20,000 As per Sec.271D @100% of such loan/deposit/ any specified sum -The Government -Banking Company, Post Office Saving Bank or Co-operative bank -Corporation established by Central, State or Provincial Act -Person having only agriculture Income As per Sec. 269T A person should not be repaid loan /deposit/any Advance from other person otherwise than by the Account payee cheque, demand draft, online transfer through bank account or any other electronic mode as may be prescribed Not a single rupee if the balance in the loan amount is greater than Rs. 20,000 As per Sec.271E @100% of such loan/deposit/ any Advance -The Government -Banking Company, Post Office Saving Bank or Co-operative bank -Corporation established by Central, State or Provincial Act -Person having only agriculture Income As per Sec. 269ST No person shall receive an amount – a) in aggregate from a person in a day; or b) in respect of a single transaction; or c) in respect to transaction relating to one event or occasion from a person, Otherwise than by Account payee cheque, demand draft, online transfer through bank account or any other electronic mode as may be prescribed If the amount is Rs. 2,00,000 or more. As per Sec.271DA @100% of such loan/deposit/ any Advance -The Government -Banking Company, Post Office Saving Bank or Co-operative bank -Transaction of nature referred to in sec.269SS
  3. 3. Page | 3 Transactions Limit Penalty Exemption (if any) As per sec. 13A, Political Party should receive donation, by Account payee cheque, demand draft, online transfer through bank account or any other electronic mode as may be prescribed or through electoral bond, for availing exemption from Tax on Income. If amount is Rs. 2,000 or more (Provide if amount is more than Rs. 20,000 record of contribution should also be maintained by Political Party) Not Applicable As per Sec. 40A(3) If assessee make payment for any expenditure to any person otherwise than Account payee cheque, demand draft, or any other electronic mode as may be prescribed or through electoral bond, for availing exemption from Tax on Income. If amount is Rs. 10, 000 or more in a single day. (i)Deduction u/s 35AD shall not be available. (ii)Will not form part of “actual cost” and consequently depreciation u/s 32 cannot be claimed (iii) Such expenditures shall be disallowed. Exemption of Rule 6DD is available. Deduction in respect of Health Insurance Premium – Section 80D If premium paid by the tax payer in mode of cash. No deduction shall be allowed from gross total income, Not Applicable Donation – Section 80G if paid in cash exceeding ₹2,000. No deduction is allowed Not Applicable Donations for scientific research or rural development - Section 80GGA if is paid in cash in excess of Rs.10,000. No deduction is allowed Not Applicable Donations by companies / any person to political parties. – Section 80GGB / Section 80GGC If Donation is made in cash No deduction shall be allowed from gross total income Not Applicable Seth & Associates was established in 1975 and since then it has been providing unparalleled value addition to its client. We are a firm with diverse and rich exposure in various fields. All our partners are full time active working partners looking into specific sector domains such as Corporate Law, Direct Tax, Indirect Taxes, Raising Capital (Bank and Equity), Business Advisory solutions, Forensic and Information Technology audit and many other core sectors relevant to overall growth of the clients. The information herein contained is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endevour to provide accurate and timely information, there can be no gurantee that such information is very accurate and considers the latest amendment in laws which are very frequent. The above is purely for academic reading and general awareness of the law. No one should act on this information without appropriate professional guidance which requires a thorough exemation of a particular situation. This content is owned by Seth & Associates, Chartered Accountants and is not be reproduced without our explicit permission. www.sethspro.com | info@sethspro.com New Delhi | Lucknow | Coimbatore

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