Income Tax Department Alerts on Severe Penalties for Large Cash Transactions

The Income Tax Department has recently issued a warning about the excessive use of cash transactions, emphasizing the strict penalties under different provisions of the Income Tax Act, 1961. To encourage digital payments and reduce cash usage, the department has introduced guidelines outlining the limits, penalties, and exceptions related to cash transactions.

Penalty for Cash Transactions Exceeding Set Limits

The department clarified that any violations involving cash transactions could lead to penalties equal to the transaction amount. This includes loans, deposits, advances, and other specified transactions that surpass the established financial limits.

1)Key Provisions on Cash Transactions

Section 269SS: Restrictions on Cash Loans and Deposits
Individuals are prohibited from accepting cash loans, deposits, or specified amounts of Rs 20,000 or more.
This also applies to advances related to the transfer of immovable property.

Exemptions apply to payments received from the government, banks, or certain institutions, as well as agricultural income earners with no taxable income.

Penalty for Violations:
Offenders will face a penalty equal to the amount of cash received, as per Section 271D.

2)Section 269ST: Restrictions on Cash Receipts

No entity is allowed to receive cash totaling Rs 2 lakh or more in the following scenarios:

• From a single individual on the same day
• For a single transaction
• From multiple transactions linked to the same event

Cash transactions involving the Government, Banks, or specified institutions are exempt from this rule.

Penalty for Violations:
A penalty equal to the total cash received will be imposed under Section 271DA.

3)Section 269T: Restrictions on Cash Repayments for Loans and Deposits

Repayments of loans, deposits, or advances amounting to Rs 20,000 or more, including interest, cannot be made in cash.

Exemptions apply to transactions involving government bodies, banks, or specified institutions.

Penalty for Violations:
The payer will incur a penalty equal to the cash amount repaid, as per Section 271E.

Mandatory Electronic Payment Facilities for Large Businesses

Under Section 269SU, businesses with a turnover surpassing Rs. 50 crore must provide payment options through designated electronic platforms like UPI, NEFT, and RTGS. However, businesses that exclusively conduct B2B transactions or meet certain non-cash payment criteria are exempt from these requirements.

Consequences of Non-Compliance

Businesses that do not comply will face a penalty of Rs. 5,000 per day under Section 271DB until they adhere to the regulations.

The Income Tax Department stressed that these measures aim to reduce the risks linked to cash transactions and promote the use of digital payment methods. Furthermore, the department highlighted instances where penalties were imposed on individuals who unintentionally violated cash loan limits.

A new brochure has been launched as a thorough guide for taxpayers, outlining the rules and penalties concerning cash transactions. Experts suggest that this initiative aims to educate taxpayers about the importance of digital payments and the consequences of ignoring cash transaction regulations.