These cash transactions may trigger 100 percent penalties Details here

The Income Tax Department has issued a fresh reminder urging taxpayers to limit their use of cash in daily transactions. Cash remains popular in India due to its convenience, but certain cash dealings can lead to hefty penalties under the Income Tax Act, 1961.

If cash transactions exceed specific thresholds, taxpayers may face disallowed deductions and penalties equal to the cash amount involved.

Here’s a closer look at the rules you need to know to avoid penalties.

CASH TRANSACTION LIMITS AND PENALTIES

Loans, deposits, and advances (Section 269SS):

You cannot accept loans, deposits, or specified sums in cash if the total amount is Rs 20,000 or more. Violating this limit attracts a penalty under Section 271D, equal to the cash accepted.

However, exceptions include transactions involving the government, banks, and notified institutions.

Receiving cash above Rs 2 lakh (Section 269ST):

No individual can accept cash exceeding Rs 2 lakh from one person in a day, for a single transaction, or multiple transactions linked to one event.

This rule applies even to fees, donations, or related-party transactions. Breaching this limit leads to a penalty under Section 271DA, equal to the amount received.

Repayment of loans and deposits (Section 269T):

Repaying loans, deposits, or specified advances in cash above Rs 20,000 is prohibited. Violations result in penalties under Section 271E, equal to the amount repaid in cash.

Exceptions include repayments to government bodies, banks, or notified institutions.

PROMOTING DIGITAL PAYMENTS

To reduce reliance on cash, businesses with turnover exceeding Rs 50 crore must facilitate digital payment methods like UPI, NEFT, and RTGS. Failing to comply results in a Rs 5,000 daily penalty under Section 271DB.

The government aims to reduce the risks of unaccounted money by discouraging cash transactions. By understanding these rules, taxpayers can avoid penalties and adopt digital financial systems for seamless and compliant transactions. Remember, staying informed about cash regulations can save you from unnecessary financial setbacks. Say “yes” to digital and “no” to cash!