Kindly provide latest cash transactions limit for audited or non audited cases. Please clarify with example also.

Reply— 

1) Section 40A(3) of Income Tax Act, 1961, provides that any expenditure incurred in respect of which payment is made in a sum exceeding Rs. 10000/- in a single day otherwise than by an account payee cheque or any other banking channel, shall not be allowed as a deduction. Thus cash payment is allowable upto s. 10,000/-.

2) According to Section 269ST of the income tax act, no person shall receive an amount of rupees two lakh or more in Cash mode. The intent of the section is clearly to put restriction on the Cash transaction.

In respect of single transaction: It simply states that no single transaction should exceed Rs. 2 lacs or more. Thus if a person splits a invoice relating to a single transaction into different invoices of smaller values, then also the person receiving such amount cannot receive in Cash.

For example: Suppose a caterer takes order for Convocation Function and received Rs. 10,00,000 in Cash from his customer and gives item-wise bill for various services and each bill doesn’t exceed Rs. 2,00,000 and Rs. 10,00,000 Cash is received on different dates and Cash received on any one day is less than Rs. 2,00,000. This splitting of bills and splitting of payments day-wise will not help as all these payments are “in respect of transactions relating to one event or occasion from a person”.

In respect of transactions relating to one event or occasion from a person: It simply states that if a person receives Cash in different transactions but all the transaction relate to one event or occasion, then also the recipient cannot receive Cash. That is to say if all the transaction relating to one event adds up to Rs. 2 lakh or more, then the person receiving the same cannot receive.

For example: If Cash gift received on account of marriage exceeds Rs.2,00,000/- from “a person” than section gets attracted as marriage is single event here. It should be noted that gift received on account of marriage is exempt from tax u/s 56(2)(vii) does not alter the applicability of penalty u/s 271DA.

Therefore this section will hit even if amount receive in a single day is less than 2 lakh rupees in following case:

a) All amount received on different days connected with a single transaction

b)  All amounts received in different transaction but related to one event or occasion.

3) In order to curb generation of black money by way of dealings in cash in immovable property transactions, section 269ss of the Income-tax Act has been amended to provide that no person shall accept from any person any loan or deposit or any sum of money, whether as advance or otherwise, in relation to transfer of an immovable property(specified sum) otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount of such loan or deposit or such specified sum is twenty thousand rupees or more.

Therefore the cash limit is Rs. 20,000/- in case of transaction relating to immovable property.