Cash transactions Limit: Income Tax Department can impose up to 100% penalty on cash transactions exceeding the limit
The Income Tax Department said in a brochure issued on January 2, 2025, “Say “No” to cash transactions.” Many information related to cash transactions have been shared in the brochure. It tells about the limit of cash transactions, the nature of the transaction and who is executing it.
In the brochure, let’s know what rules the Income Tax Department has given regarding cash:
1. Section 269SS: Accepting/taking loans, deposits and specified amounts in cash
No person can accept any loan or deposit or other specified sum in cash if the amount (or aggregate of amounts) is Rs 20,000 or more. Specified sum means taking an advance or any amount in respect of the transfer of immovable property.
This rule does not apply to:
- Government banking company, post office savings bank or co-operative bank (but not all co-operative societies, whether engaged in banking or related activities or not).
- A corporation established by a Central, State or Provincial Act.
- A Government company falling under section 2(45) of the Companies Act, 2013;
- A notified institution, association or body (or class of institutions, associations or bodies).
The above order does not apply even if both the cash payer and the cash receiver are earning agricultural income and neither of them has any income taxable under the Income Tax Act, 1961.
Penalty for violation
If this rule is violated, then under section 271D of the Income Tax Act, the amount of cash taken will have to be paid as a penalty.
2. Section 269 ST: Receiving money in cash
Under Section 269ST of the Income Tax Act, a person is prohibited from receiving an amount of Rs 2 lakh or more in cash in a day. This rule applies to everyone, whether the person is a taxpayer or not.
Under this rule, an amount exceeding Rs 2 lakh cannot be taken in cash in the following circumstances:
- Total amount that can be taken from one person in a day: A sum of more than Rs 2 lakh cannot be taken in cash from a single person in a day.
- For any one event or occasion: An amount exceeding Rs 2 lakh cannot be taken in cash from a single person for any one event or occasion like marriage, birthday etc.
Who does this rule apply to?
This rule does not apply tofees charged by educational institutions and hospitals, donations given by religious institutions and transactions between two related persons or in which both the giver and the receiver are exempt from tax.
Government or any banking company, post office savings bank or a co-operative bank (but not all co-operative societies, whether engaged in banking or related activities or not).
Penalty for violation
The Income Tax Department said, “Whoever has taken cash in violation of the above order will be fined under section 271DA, equivalent to the amount taken in cash.”
3. Section 269T: Repayment of loan or deposit
No person can make payment of Rs 20,000 or more in cash. Government, banks, post office savings banks are exempted from this rule.
Penalty for violation
Under section 271E, the penalty will be equivalent to the amount paid in cash.
Section 269SU: Accepting payment through electronic mode
Those whose annual turnover is more than Rs 50 crore will have to provide the facility of accepting payments through prescribed electronic methods.
Penalty for violation:
Under section 271DB, a fine of Rs 5,000 will be imposed for each day for violating the rule. Actually this brochure is a compilation of the provisions related to cash transactions. Through this, the government wants to make people aware about the penalty imposed on cash transactions. The government is trying to make people avoid paying in cash even for small transactions so that digital transactions can be promoted.
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