Arjuna (Fictional Character): Krishna, Goddess Mahalaxmi has arrived in the houses of taxpayers to bless the followers with prosperity. Laxmi word is also used to refer cash in India. How does a taxpayer ensure not to hurt Goddess Laxmi while doing transactions in cash (Laxmi)?
Krishna (Fictional Character): Yes Arjuna, Mahalaxmi Festival is celebrated with great enthusiasm by the taxpayers and the taxpayers ensure that the proper preparations and arrangements are made for arrival of Goddess Mahalaxmi. Along with this the taxpayer should keep in mind the provisions while dealing in cash.
Arjuna (Fictional Character): Krishna, what are the implications if a person makes purchases and expenses in cash?
Krishna (Fictional Character): Arjuna, according to section 40A(3) of the Income Tax Act, if payment for any expenditure exceeding Rs.10,000 is made in cash in a day, then the expenditure will be disallowed under the Income Tax Act. Additionally, section 43 states that, if cash payment for the acquisition of any asset exceeds Rs.10,000 in a day, then such expenditure will be not considered in determining actual cost of the asset. Hence depreciation is not allowed on it.
Arjuna(Fictional Character): Krishna, what are the implications if a person accepts or repays any amount in cash?
Krishna(Fictional Character): Arjuna, as per section 269ST of the Income Tax no person shall receive a sum in cash of Rs.2,00,000 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
Also, as per Section 269SS of the Income Tax Act, no person shall accept any loan or deposit or specified sum in cash from a person if the aggregate amount of such loan/deposit along with any previous unpaid loan or deposit (if any) is Rs.20,000 or more.
Section 269T provides that no person shall repay any loan or deposit made with it in cash if the amount of the loan or deposit together with the interest is Rs.20,000 or more.
Arjuna(Fictional Character): Krishna, what are the implications if a person withdraws cash from his bank account?
Krishna(Fictional Character): Arjuna, there is no limit as such for withdrawal of money from bank but Section 194N deals with TDS on withdrawal of money from bank. According to section 194N TDS shall be deducted for cash withdrawals at the rate of-
- 2% if the amount of withdrawal exceeds Rs.1,00,00,000 in aggregate during the financial year.
- However, if the withdrawer has not filed his Income Tax Return for 3 previous assessment year then 2% TDS is deducted for the amount from 20 Lakhs-1 crore and 5 % TDS is deducted for amount exceeding Rs.1 Crore.
Arjuna(Fictional Character): Krishna, what are the implications if a person Deposits cash in his bank account?
Krishna(Fictional Character): Arjuna, there is no limit as such for cash deposits in bank accounts but High valued Cash Deposits in Bank are reported by Bank in Statement of Financial Transactions(SFT) which is reflected in the 26AS and AIS(Annual Information Statement) of the depositor. The Limit for Reporting in Statement of Financial Transactions (SFT) is as follows:
- If during the Year Rs 10,00,000 or more is deposited in Saving Account.
- If during the Year Rs 50,00,000 or more is deposited in Current Account.
Arjuna(Fictional Character): Krishna, what lesson we should take from this?
Krishna(Fictional Character): Arjuna, Just like a taxpayer ensure that no compromises are made in preparations for welcoming Goddess Mahalaxmi, the taxpayers should make sure that they do not contravene any provisions relating to cash in order to avoid problematic consequences.
CAclubindia
