New rule of cash transaction to avoid penalty

Latest Updates these income tax rules to avoid penalty in cash transaction

New Delhi: tax rules in India don’t allow cash transactions for any purpose above the limit of Rs 2 lakh. However, recently the tax department relaxed this rule for payment of hospital bills on account of Covid treatment for the amount between April 1 and should 30. In such cases hospitals are asked to require a replica of the Aadhaar and PAN of the patient and therefore the person giving the cash . If the individual paying the bill is aside from the patient, then he/she must state his/her relationship with the patient.

But for most other transactions the above rule remains applicable. for instance , if you’re buying gold jewellery worth Rs 3 lakh during a single transaction, then you’ve got to compulsorily make payment through cheque, mastercard , open-end credit or bank transfer.

This rule is applicable albeit you’re receiving money from any of your relatives. a private cannot accept quite Rs 2 lakh cash from close relatives during a single day.

Cash transaction limit on business expenditure

Companies, firms also are not allowed to simply accept or pay beyond a limit. If a business owner transacts for quite Rs 10,000 in cash, then that quantity can’t be claimed as an expenditure.

For tax-saving instruments

If you’re doing any tax-saving investment to say deduction under Section 80C or the other section like Section 80D

When doing all of your tax planning, make sure that you don’t buy insurance in cash. The law doesn’t allow the taxpayer to require advantage of Section 80D if he pays the premium in cash. it’s to be done mandatorily through the banking channel.

For loans and property

If someone is taking a loan from a financial organization or maybe from a lover in cash, then the quantity can’t exceed Rs 20,000. an equivalent rule applies to repayment of the loan. For loan repayment of Rs 20,000, the person must pay through the banking channel.

The maximum cash permitted during a property transaction, too, is Rs 20,000. albeit a seller is taking an advance, the limit is that the same.

Worth mentioning here is that in most cases, the onus is on the receiver to not accept cash. Typically, the tax department levies the penalty on the receiver, like the quantity received in cash. It’s not allowed albeit you receive the cash in cash and immediately deposit it within the checking account .

However, some transactions are out of this purview. If you run a business and need to deposit over Rs 2 lakh within the checking account which you’ve got received through multiple transactions by selling your goods and services, then it’s allowed.

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