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The Finance Act 2017 through amendments (see below) to pre-existing provisions of the Income Tax Act 1961 (the Act) and the introduction of new provisions (see below) thereunder, has further tightened the screws on cash transactions, as the Government of India’s drive for a ‘digital’ economy gathers further steam in order to achieve greater efficiency and transparency thereto.

> Read more on other key changes brought about by the said Finance Act 2017.


Mode of undertaking transactions – section 269ST

(new provision)

The above said provision prohibits (subject to some exceptions as provided below) persons from receiving money, otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account, of an amount of Rs.2 lacs or more

  • In aggregate from a person in a day; or
  • In respect of a single transaction; or
  • In respect of transactions relating to one event or occasion from a person.


Excluded Transactions

Provided that the above said provision shall not apply to—

  • Any receipt by—
    (a) Government;
    (b) any banking company, post office savings bank or co-operative bank;
  • Transactions of the nature referred to in section 269SS;
  • Such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.


CBDT Press Release (5 April 2017)

The said Press Release clarifies that the above said restriction are not applicable to the following –

  • Any receipt by Government, Banking Company, Post Office Savings Bank or Co-operative Bank
  • Withdrawal of cash from a Bank, Co-operative Bank or a Post Office Savings Bank.

It has also been provided that any ‘capital expenditure‘ in cash exceeding Rs.10,000 shall not be eligible for claiming ‘depreciation allowance’ or ‘investment-linked deduction’.

> Access CBDT Press Release


Penalty for Failure (to comply with provisions of section 269ST) – section 271DA

(new provision)

Person who receives any sum in contravention of the provisions of the above mentioned section 269ST is liable to pay by way of penalty a sum equal to the amount of such receipt (no penalty shall be imposed if such person proves that there were good and sufficient reasons for the contravention).

> Read more on ‘Penalty‘ and ‘Penalty Notice‘ under the Act


Expenses or payments not deductible in certain circumstances – section 40A(3)

(Amendment)

For Assessment year 2018-19, no deduction for computing income under the head “Profts and Gains from Business or Profession” shall be allowed to an Assessee for any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account, exceeds Rs.10,000.


Deduction in respect of donations to certain funds, charitable institutions, etc. – section 80G

(Amendment)

No deduction is to to be allowed for Assessment year 2018-19 onwards under the above said section in respect of donation of any sum exceeding Rs.2000 (reduced from Rs.10,000) unless such sum is paid by any mode other than cash.

 

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