The Finance Act, 2017 has also made certain more amendments to push India towards “less cash” economy and to reduce generation and circulation of unaccounted money. Under the Income Tax Act, there are various provisions which restrict cash transactions by restriction through disallowance, higher taxation, penalties, reporting by Annual Information Report (AIR), withdrawal of benefits, providing incentives for noncash transaction, reporting in ITR forms etc. we discuss in this article, provisions, related to restriction of cash transactions under Income Tax Act, 1961 along with amendment made by Finance Act, 2017. Provisions may cause disallowance, penalty, higher taxation or selection of case through Computer Aided Scrutiny System (CAAS).

“Various legislative steps have been taken by the Finance Act, 2017 to curb black money by discouraging cash transaction and by promoting digital economy.”

• These prominently include placing restriction on cash transaction by introduction of New Sections 269ST & 271DA to the Income-tax Act. It has been provided that no person (other than those specified therein) shall receive an amount of two lakh rupees or more, (a) in aggregate from a person in a day; (b) in respect of a single transaction; or (c) in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account.
• Any contravention to the said provision shall attract penalty of a sum equal to the amount of such receipt. However, the said restriction is not applicable to any receipt by Government, banking company, post office savings bank or co-operative bank. It has also been decided that the restriction on cash transaction shall not apply to withdrawal of cash from a bank, co-operative bank or a post office savings bank. Necessary notification in this regard is being issued.
• It has also been provided that any capital expenditure in cash exceeding rupees ten thousand shall not be eligible for claiming depreciation allowance or investment-linked deduction. Similarly, the limit on revenue expenditure in cash has been reduced from Rs.20,000 to Rs.10,000.
• In order to promote digital payments in case of small unorganized businesses, the rate of presumptive taxation has been reduced from 8% to 6% for the amount of turnover realised through cheque/digital mode.
• Restriction on receipt of cash donation up to Rs. 2000 has been provided on political parties for availing exemption from Income-tax. Further, it has also mandated that any donation in cash exceeding Rs.2000 to a charitable institution shall not be allowed as a deduction under the Income-tax Act.

In order to achieve the mission of the Government to move towards a less cash economy and to reduce the generation and circulation of black money, the Government has taken many measures by amending the below mentioned provisions of Income Tax Act, 1961 through Finance Act, 2017 effective from 1 April 2017.

Conclusion:

It is suggested to incur the expenditure through digital way to contribute towards fulfillment of the mission of the Government of a less cash economy. Digital payments help in proper maintenance of books of accounts and help in timely compliances. If cash payment is compulsory then above mentioned provisions should be carefully considered to avoid any tax consequence.

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Acquisory News Chronicle - August 2017