In a move to clamp down on illegal and unaccounted cash transactions, the government had amended cash limit rules earlier in the year.Paying or receiving cash above the limits set is punishable by a steep penalty of up to 100 per cent of the amount paid or received.
Under the new rules and regulations set by the Central Board of Direct Taxes (CBDT), individuals looking to deposit more than Rs 20 lakh a year will now need to present their PAN details and their Aadhaar card mandatorily.
While earlier there was a limit of Rs 50,000 per day before individuals needed to furnish PAN details when depositing cash, the Income Tax department had set no annual limit.
But under the new rules, cash withdrawals and deposits of large sums of money in a single year across single or multiple banks need to be followed with PAN and Aadhaar details to create trackable details.
"Every person shall, at the time of entering into a transaction specified in column (2) of the Table below, quote his permanent account number or Aadhaar number, as the case may be, in documents pertaining to such transaction, and every person specified in column (3) of the said Table, who receives such document, shall ensure that the said number has been duly quoted and authenticated," the CBDT said in its notice dated May 10.
Individuals who do not have a PAN need to apply for a PAN at least seven days before entering any transaction of above Rs 50,000 a day or above Rs 20 lakh a financial year.
The Income Tax department, along with other Central government departments, has been updating and amending rules to reduce the risk of financial fraud, illicit money transactions and other money crimes over the past few years.
The government also forbids receiving cash worth more than Rs 2 lakh to restrict the use of cash in high-value transactions. So, a person cannot accept more than Rs 2 lakh in cash, not even from close family.
The government has set various limits on cash transactions to combat black money. Let's take a look at some cash transactions that may have serious consequences:
- India's income tax laws prohibit cash transactions above Rs 2 lakh for any reason. For example, if you purchase gold jewellery worth Rs 3 lakh in a single transaction, you must make payment via cheque, credit card, debit card, or bank transfer.
- You must follow this guideline even if you receive money from any family member.
- The government prohibits anyone from accepting cash worth more than Rs 2 lakh to limit cash usage in high-value transactions. So, in a single day, an individual cannot accept more than Rs 2 lakh in cash, even from close relatives.
- One cannot accept even a cash gift of more than Rs 2 lakh from a single donor on a single occasion. Those who accept cash over Rs 2 lakh violating this clause may face a penalty equivalent to the amount received.
- Make sure you don't pay for health insurance in cash while tax planning. If taxpayers pay their insurance premium in cash, they are not eligible for the Section 80D deduction. It is required to be done through the banking system.
- If a person takes a cash loan from a financial institution or a friend, the total amount cannot exceed Rs 20,000. The same regulation applies to debt repayment. The repayment of a Rs 20,000 loan must be made through a financial channel.
- In a property transaction, the maximum cash allowed is also Rs 20,000. The limit remains the same even if a seller accepts an advance.
- When it comes to self-employed taxpayers, they cannot claim any expenditure over Rs 10,000 if it's paid in cash to a single person in a single day. The law establishes a higher threshold of Rs 35,000 for payments given to a transporter.
As a financial compliance expert well-versed in government regulations, particularly concerning cash transactions and taxation in India, I can provide comprehensive insights into the nuances of recent amendments and regulations set by the Central Board of Direct Taxes (CBDT). My expertise is grounded in a deep understanding of the legal frameworks and policies governing cash limits, mandatory documentation requirements such as PAN (Permanent Account Number) and Aadhaar cards, and the penalties associated with non-compliance.
The government's move to enforce stricter rules on cash transactions is evidenced by the amendments introduced earlier. These amendments aim to curb illegal and unaccounted cash dealings, combating issues related to black money and financial fraud. The crux of these regulations involves setting limits on cash transactions, imposing penalties for exceeding those limits, and mandating the use of PAN and Aadhaar details to track and authenticate transactions.
Under the updated guidelines, individuals intending to deposit more than Rs 20 lakh annually must furnish their PAN and Aadhaar details mandatorily. Previously, the limit for requiring PAN details when depositing cash was Rs 50,000 per day, but now the Income Tax department necessitates PAN and Aadhaar details for both large cash withdrawals and deposits made within a single year across single or multiple banks.
The CBDT's directive, issued on May 10, emphasizes the mandatory quoting and authentication of PAN or Aadhaar numbers in documents related to specified transactions. Additionally, individuals without a PAN are required to apply for one at least seven days before engaging in transactions exceeding Rs 50,000 a day or Rs 20 lakh in a financial year.
These stringent regulations cover various scenarios, including restrictions on cash transactions above Rs 2 lakh, irrespective of the reason, and limits on accepting cash gifts or payments from family members exceeding the specified thresholds. There are also guidelines pertaining to cash transactions related to purchasing gold, receiving cash gifts, health insurance premium payments, loans, debt repayments, property transactions, and expenditure limits for self-employed individuals.
Adhering to these regulations is crucial to avoid penalties and ensure compliance with India's income tax laws. The government's objective is to foster transparency, discourage the use of cash in high-value transactions, and mitigate the risks associated with financial fraud and illicit money transactions.
In summary, the key concepts covered in the article include:
- Amendments by the government to restrict illegal and unaccounted cash transactions.
- Mandatory PAN and Aadhaar details for cash deposits exceeding Rs 20 lakh annually.
- Limits and penalties associated with cash transactions, including exceeding Rs 2 lakh.
- Guidelines for various transactions such as purchasing gold, cash gifts, health insurance premium payments, loans, property transactions, and expenditure limits for self-employed individuals.
These regulations underscore the government's commitment to combatting financial irregularities and promoting a more transparent financial ecosystem.
