1.1 Restrictions on Cash Payment for any Business Expenditure:
Payment or aggregate of payments to any person on a single day in respect f purchases or any expenditure exceeding Rs.10,000 (Rs. 35,000/- in case of payments for plying, hiring, or leasing goods carriages) should be made by an account payee cheque or an account payee bank draft or through ECS except under circumstances specified in Rule 6DD.
Any payment made on contravention of the above shall be disallowed as expenditure and taxed.
1.2 Restriction on Cash Payment for any Capital Expenditure:
Payment or aggregate of payments to any person on a single day in respect of any expenditure on acquisition of any asset, exceeding Rs.10,000/- should be made by an account payee cheque/bank draft or through ECS. Otherwise, such expenditure shall be ignored for the purposes of determination of actual cost of such asset, accordingly, the assessee shall not be entitled to depreciation u/s32 on the cost of the asset so ignored., also, the cost so ignored shall not be eligible for deduction u/s35AD.
1.3 Restriction on Acceptance of Loans, Deposits, etc. of Rs. 20,000 or more in Cash: [Sec 269SS]
No person can take a loan or accept a deposit or accept a sum, as advance or otherwise, in relation to transfer of immovable property, of Rs. 20,000/- or more, from any other person (including any deposit, Loan, or sum taken or accepted earlier from that person and remaining unpaid), except by an account payee cheque/draft or by using an electronic clearing system through a bank account.
This restriction shall not be applied in the loan or deposit is taken or accepted from Government, Bank, Post Office, Co0operativen bank, Government Undertaking, etc.,
Any contravention of the above provision entails a penalty equal to the amount of loan or deposit or sum accepted.
1.4 Restrictions on Repayment of Loans and Deposits, etc., [269ST]
No firm, co-operative society, or company (including a banking company and a co-operative bank) or any other person can repay any loan or deposit or any sim against the transfer of immovable property, except by an account payee cheque/draft or by using electronic clearing system through a bank account, if the amount of such loan or deposit or sum together with interest thereon, is Rs. 20,000/- or more.
However, any loan or deposit taken or accepted from a Government banking company, post office savings bank, co-operative bank, a statutory banking corporation, a government company or other notified institution, association, or body, may be repaid without any such restriction.
Any contravention of the above restrictions entails a penalty equal to the amount of loan or deposit or sum repaid.
1.5 Restrictions on Acceptance or Repayment of Hundi Loans: [Sec 69D]
All hundi loans of any amount should be borrowed or repaid only through an account payee cheque drawn on a bank, if any person borrows any amount against a hundi or repays any amount due thereon, otherwise than through an account payee cheque, then the amount so borrowed or repaid shall be treated as income of the person borrowing or repaying the amount for the previous year in which the amount was so borrowed or repaid and no deduction for any expenditure/allowance shall be allowed in computing such income (sec69D)
Any amount borrowed or repaid on hundi, taxable as income u/s 69D, shall be taxed @60%. Besides, a surcharge of @25% of the amount of income tax shall also be payable.
Any contravention of the above provision noted by the Assessing officer (and not declared by the assessee) shall attract a penalty equal to 100% of the tax payable on such income. [Sec271AAC]
1.6 Restriction on Receipt of Rs 2 Lakh or more in Cash: [Sec271ST]
W.e.f 1.4.2017, no person shall receive an amount of Rs. 2,00,000 or more-
(i) in aggregate for a person give me a day, or
(ii) in respect of a single transaction,
(iii) in respect of transactions relating to one event or occasions from a person,
Excel by an account payee cheque or bank draft or by ECS in a bank account.
Receipt of one installment or loan repayment in respect of your loan by an nbfc or housing finance company cell constitutes a single transaction and all installments date for a loan shall not be aggregated for the purpose of this provision.
1.7 Restriction on Cash Payment for Medical Insurance premium and Medical Treatment Expenditure: [Sec 80D]
An assessee, being individual or HUF, is eligible to claim a deduction for payment of medical insurance premium, CGHS contribution, medical treatment expenditure, etc., subject to specified limits. The deduction shall be allowed if the payment is made by any mode except cash.
However, payment for preventive health check-ups may be made in cash also.
1.8 Restriction on Cash Donations:
An assessee is entitled to claim a deduction for donations made to specified charitable institutions, research associations, political parties., etc. these deductions are allowable either regard to following restrictions as to donation made in cash: -
(i) Donation to specified Charitable institutions (U/s80G) of a sum exceeding Rs.2,000 shall be not deductible if it is paid in cash.
(ii) Donation to eligible research association, etc. (U/s80GGA) of a sum exceeding Rs. 10,000/- shall be not deductible if it is paid in cash.
(iii) Donation to political parties (u/s 80GGS and 80GGC) irrespective of the amount shall be not deductible if it is paid in cash.
1.9 Reporting of Cash Sales:
section 285BA requires a specified person to furnish a statement of specific financial transactions (in form 61) exceeding the specified limits. Under this come on rules 114, requires that any person liable to audit under section 44AB shall be required to furnish a statement in respect of receipt of cash payment exceeding INR two lacs for sale of any goods or services. The statement shall be furnished electronically under digital signature, in respect of every financial year by 31st May next following. The reporting person shall also be required to obtain registration with the income tax authority.
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