What’s New in In­come Tax?

Yes, there are re­stric­tions on cash trans­ac­tions

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Yes, there are re­stric­tions on cash trans­ac­tions

The Cen­tral Board of Di­rect Taxes (CBDT) has pro­vided some re­stric­tions in the In­come Tax Act that took ef­fect from 1 April 2017 (fi­nan­cial year 2017– 18 and as­sess­ment year 2018–19), in re­spect of ex­pen­di­ture by way of cash, lend­ing by way of cash, and in­vest­ment by way of cash. These are ap­pli­ca­ble un­der var­i­ous sec­tions of the In­come Tax Act to curb cir­cu­la­tion of black money and to help build a robust econ­omy.

Sec­tion 40A (3) of In­come Tax Act

Any pay­ment in ag­gre­gate to the same per­son dur­ing a day should not ex­ceed Rs 10,000 (till last year it was Rs 20,000) in cash or a bearer cheque. This re­stric­tion does not ap­ply where the ex­pen­di­ture is for per­sonal pur­poses – that is, the per­son is not claim­ing this as his/her business or pro­fes­sional ex­pen­di­ture. (Sup­pose a per­son gets his house white­washed. He may have to pay the painter in cash. Since white­wash­ing the house is per­sonal ex­pen­di­ture, there is no prob­lem. But if such ex­pen­di­ture is in­curred in cash for of­fice white­wash­ing, then he can­not claim such ex­pen­di­ture. This re­stric­tion does not ap­ply to pur­chases in cash).

Sec­tion 80C

This sec­tion al­lows de­duc­tion of life in­sur­ance premium (LIP), pub­lic prov­i­dent fund (PPF), prov­i­dent fund (PF), na­tional savings cer­tifi­cate (NSC), etc., up to a limit of Rs 150,000 paid out of the as­sessee’s in­come. If an as­sessee bor­rows money and makes savings out of such bor­rowal, the de­duc­tion is not avail­able. As a re­sult of re­stric­tions on cash pay­ment U/S 269ST and 269SS, LIP paid in cash will not be al­lowed as a de­duc­tion since LIC or other in­sur­ance agen­cies are not in the ex­empted list pro­vided in the Sec­tion. How­ever, banks and post of­fices are cov­ered and hence de­posit in cash in a bank or de­posit in a post of­fice, NSC, PPF, etc., can be done in cash. Care should be taken that the same is made out of tax-paid in­come of the as­sessee.

Any medi-claim ef­fected on the life of self, chil­dren and par­ents will be avail­able as de­duc­tion sub­ject to the pre­scribed lim­its, but the premium should not be paid in cash or by bearer cheque.

Sec­tion 80G

This pro­vides for de­duc­tion of 50 per cent of the do­na­tions paid to char­i­ta­ble in­sti­tu­tions that are recog­nised by the In­come Tax Depart­ment in this con­text. Here cash do­na­tions of more than Rs 2,000 are not el­i­gi­ble for de­duc­tion (till last year this limit was Rs 10,000).

Chap­ter XX-B

This gov­erns the pro­vi­sions re­gard­ing the re­quire­ment as to the mode of ac­cep­tance or pay­ment or re­pay­ment of cer­tain monies to coun­ter­act eva­sion of tax.

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