Restriction on cash Transactions - Budget 2017

1.     Cash transactions above Rs. 3 lakh not to be permitted.

Budget 2017 insert a new section 269ST, to provide that no person shall receive an amount of three lakh rupees 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,

The proposed restriction shall not apply to Government, any banking company, post office savings bank or co-operative bank.

The above restriction shall not apply for transactions in the nature specified under section 269SS (Mode of taking or accepting certain loans, deposits and specified sum).

Penalty for non-compliance

100% penalty is proposed to be levied in case of non-compliance.

New section 271DA is proposed to be inserted to effect the provision of penalty in case of non-compliance under section 269ST. The said penalty shall however not be levied if the person proves that there were good and sufficient reasons for such contravention. It is also proposed that any such penalty shall be levied by the Joint Commissioner.

The provision related to tax collection at source at the rate of one per cent. of sale consideration on cash sale of jewellery exceeding five lakh rupees is also proposed to be omitted by amending the provisions of section 206C.

These amendments will take effect from 1st April, 2017.

2.     Cash expenditure allowable to be reduced from Rs. 20,000 to Rs. 10,000.

Section 40A is proposed to be amend to provide the following:

       i.            To reduce the existing threshold of cash payment to a person from twenty thousand rupees to ten thousand rupees in a single day; i.e any payment in cash above ten thousand rupees to a person in a day, shall not be allowed as deduction in computation of Income from "Profits and gains of business or profession";

     ii.            Deeming a payment as profits and gains of business of profession if the expenditure is incurred in a particular year but the cash payment is made in any subsequent year of a sum exceeding ten thousand rupees to a person in a single day; and

  iii.            Further expand the specified mode of payment under respective sub-section of section 40A from an account payee cheque drawn on a bank or account payee bank draft to by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account.

The amendment will take effect from 1^st April, 2018 and will, accordingly, apply in relation to the assessment year 2018- 19 and subsequent years.

3.      In the presumptive income tax for small traders, income to be taken as 6% of turnover which is received by digital or banking means.

It is proposed to amend section 44AD of the Act to reduce the existing rate of deemed total income of eight per cent. to six per cent in respect of the amount of such total turnover or gross receipts received by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account during the previous year or before the due date specified in sub-section (1) of section 139 in respect of that previous year.

 However, the existing rate of deemed profit of 8% referred to in section 44AD of the Act, shall continue to apply in respect of total turnover or gross receipts received in any other mode.

This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent years.

4.     Restricting cash donations

Section 80G is proposed to be amend so as to provide that no deduction shall be allowed under the section 80G in respect of donation of any sum exceeding two thousand rupees unless such sum is paid by any mode other than cash.

Under the existing provision, deduction under section 80G is allowed for cash payment upto Rs. 10,000.

This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.

5.     Disallowance of depreciation under section 32 and capital expenditure under section 35AD on cash payment

Section 43 is proposed to be amend, to provide that where an assessee incurs any expenditure for acquisition of any asset in respect 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 ten thousand rupees, such expenditure shall be ignored for the purposes of determination of actual cost of such asset.

Section 35AD (Deduction in respect of expenditure on specified business), to provide that any expenditure in respect of which payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account, exceeds ten thousand rupees, no deduction shall be allowed in respect of such expenditure.

These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.