In order to address the issue of black money, the government banned cash transactions of Rs 2 lakh and above starting April 1, 2017. Any amount over Rs 2 lakh will have to be paid by account payee cheque, bank draft or electronic bank transfer. How should one compute this limit of Rs 2 lakh on cash dealing? Is it a daily limit or monthly limit or annual limit? Is it person specific or transaction specific or event/occasion specific?
Let’s try and find answers to some of these questions:
Case 1: Receiving money from one person in a day against various bills of goods or services
Even if you are receiving money in respect of various bills from the same person, you would fall in the net. Hence, those planning to break the amount receivable from a single person into various bills ensuring that each bill is for less thanRs 2 lakh, in order to avoid the penal implication would fail.
Case 2: Receipt of cash in respect of a single transaction on different dates
Sale of goods or service or asset entailing receipt of cash on various dates shall be clubbed to check the limit of Rs 2 lakh. Hence, those selling a property/good/service for cash, receiving cash in instalments of less than Rs 2 lakh a day, would not go scot free and would be liable to penal implications.
Case 3: The limit of Rs 2 lakh on cash transaction is not restricted to income
One must keep in mind that this limit on cash receipt is not restricted to the receipts of income. Even an amount of loan repayment, reimbursement, gift from a relative, receipt of agricultural income or other tax exempt receipts are within the purview of this provision. Those receiving cash beyond the prescribed limit in respect of any transaction, would be liable to penal actions. Keeping in mind the genuine cases, the government has provided for certain exceptions.
Case 1: Relief for those receiving cash in respect of one event or occasion from various persons, since the limit of cash is in respect of one occasion / event from one person.
Hence, receiving cash from various relatives on the occasion of marriage would remain out of the purview of these penal provisions. Even an event organiser receiving the money in cash from various persons for one event, would not be liable to shell out the penalty.
Case 2: Cash deposits and withdrawals from one’s own bank remain out of the purview of these penal provisions. Hence some respite for traders dealing in cash owing to the structure of the Indian economy.
Case 3: The restriction is not applicable to any receipt by government, banking company, post office savings bank or co-operative bank.
Some subjectivity still stays
One question that still remains unanswered is whether a transaction of rendering services at various instances to the same person be considered as a single transaction. Such questions would stand answered only on consideration of facts and circumstances of each case, and we hope that this doesn’t mean harassment to genuine taxpayers.
The author is executive director, Nangia & Co. LLP