Demonetisation of high-value currency notes was done to clamp down on black money, among other things. As a fallout of this decision, focus also shifted to urging people to move towards cashless transactions. However, India is basically a cash dependent economy, especially if we consider the infrastructure in rural India, where electricity and water is still considered a privilege , leave alone banking channels for day-to day transactions such as grocery shopping, etc.
Amidst the dream to eradicate black money and the absence of basic infrastructure to support a cashless structure, let’s first get clarity on what are the tabs on cash transactions, how it impacts our day-to-day transactions and understand if we can be a part of this movement.
Cash restriction in Budget 2017
Accepting the Special Investigation Team’s (SIT) recommendation to reduce cash transactions, the following restrictions have been imposed:
Cash expenditure over R10,000 to attract disallowance while computing taxable income.
Cost of fixed assets for allowance of depreciation and investment linked deduction, not to include cash expenditure exceeding R10,000.
Donation exceeding R2,000 in cash shall not be eligible for deduction.
The benefit of presumptive taxation at 6% as against 8% shall be available only if the turnover is realised through banking channels
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No person shall receive an amount of R3 lakh or more in cash—
(a) In aggregate from a person in a day;
(b) In respect of a single transaction; or
(c) In respect of transactions relating to one event or occasion from a person.
How does it impact us?
The last part of the restriction on cash transaction of R3 lakh prohibits artificial splitting of one transaction into various parts, since it refers to the occasion in respect of which the payment is made. If one is making a payment of R10 lakh to a banquet for a wedding; it may not be possible to split the transaction by taking four invoices of R2.5 lakh each and paying cash, since the transaction is in respect to one occasion, i.e., wedding.
Support this movement
A push for permeating digitalisation into every sector of the economy is obvious from the Budget proposals. PoS machines and parts and components of such machines have been exempted from customs duty. This shall encourage vendors to use banking channels for receiving payment.
As a socially responsible citizen hoping to live in an economy free from the perils of black money, we should also try to use the banking channel for our day-to-day transactions, by using credit card, debit cart, e-wallets, etc., as much as possible. With all the moves in the direction of cashless or less-cash India, it is rather surprising to see that the government did not accept the SITs recommendation of restriction on cash holding.
The writer is executive director, Nangia & Co.
