Beware of cash: A few transactions can draw Income Tax ire; know which ones

While Indian society has a long inclination to transact in cash, the government has been, for the past several years, trying its best to move away from it and gradually move towards a cashless society. Even the widely and increasingly popular UPI is designed to facilitate movement away from cash transactions. The Income Tax Department has made it clear that it will impose penalty that is equal to the amount paid in cash is the transaction is done in cash. Therefore, the penalty amounts to 100% of the transaction value.

Senior Income Tax officials have told the media that there has been instances when 100% penalty has been charged on persons who committed the cash transactions beyond permissible limit out of genuine lack of awareness. Therefore, in order to avoid harassment and/or financial injury, one must be aware of the situation when such Income Tax actions might develop.

Taking certain loans, deposits in cash

“No person shall accept in cash any loan or deposit or other specified sum if the amount (or aggregate of the amounts) involved total(s) to Rs 20,000 or more. Specified sum means any sum of money receivable, as advance or otherwise, in relation to the transfer of an immovable property whether the transfer takes place or not. The amount or the aggregate amount shall include any cash received earlier and remaining unpaid,” the Income Tax department mentioned in a document. However, it won’t apply if the amount is distributed by the government, a bank, post office savings bank or co-operative bank.

Receiving other amounts in cash (Section 269 ST)

The Income Tax department also stated that “no person-whether assessed to tax or not-shall take (receive) in cash any amount(s) totalling Rs 2 lakh or more:
In aggregate from a person in a day; or
In respect of a single transaction; or
In respect of transactions relating to one event or occasion from a person.”

Repayments of certain loans or deposits (Section 269T)

Another point mentioned by the Income Tax department said that “No branch of a banking company or a cooperative bank; No other company or cooperative society; or
No firm or other person will repay in cash any loan or deposit or any specified advance if the amount (or the aggregate amount) involved with the applicable interest totals Rs 20,000 or more.”