Under the Income Tax Act (ITA), 1961, individuals are not restricted on the amount of cash they can store at home. However, during income tax raids, individuals must provide a legitimate source for the cash accumulated. Failure to do so can result in penalties and seizure of unaccounted money, with fines potentially reaching up to 137% of the total amount.
Here are some crucial rules mandated by the income-tax department regarding cash transactions:
-
Limit on Cash Acceptance:
To prevent unregulated transactions and curb the flow of black money, the income-tax department prohibits individuals from accepting Rs 20,000 or more in cash for loans or deposits. This measure aims to promote transparency and discourage the use of cash for large financial transactions.
-
PAN Requirement:
The Permanent Account Number (PAN) serves as a unique identifier for taxpayers and is mandatory for transactions exceeding Rs 50,000. By linking transactions to PAN, authorities can track financial activities and ensure compliance with tax regulations. This requirement enhances transparency and accountability in financial dealings, discouraging tax evasion and fraudulent practices.
-
Scrutiny for Cash-Based Asset Transactions:
Transactions involving the purchase or sale of assets exceeding Rs 30 lakh in cash may undergo scrutiny by investigating agencies. This measure is aimed at detecting and preventing instances of money laundering, tax evasion, and other financial irregularities. By monitoring high-value cash transactions, authorities can identify potential tax evasion and take appropriate enforcement actions.
-
Monitoring Credit-Debit Card Transactions:
Transactions exceeding Rs 1 lakh through credit or debit cards are subject to investigation to prevent financial irregularities. With the widespread use of electronic payment methods, authorities can monitor and track high-value transactions more effectively. This helps in detecting suspicious activities and ensuring compliance with tax laws, thereby promoting a more transparent and accountable financial system.
-
TDS on Large Cash Withdrawals:
To discourage large cash withdrawals and promote digital transactions, individuals withdrawing over Rs 1 crore in cash from banks are liable for a 2% Tax Deducted at Source (TDS). This measure incentivizes taxpayers to use electronic payment methods and reduces the circulation of unaccounted cash in the economy. By imposing TDS on large cash withdrawals, authorities aim to curb tax evasion and promote a cashless economy.
-
Penalties for Cash Transactions:
Cash transactions above Rs 20 lakh in a year can attract penalties under income tax laws. Additionally, property transactions exceeding Rs 30 lakh in cash may prompt investigation by tax authorities. These penalties serve as deterrents against engaging in cash transactions and promote compliance with tax regulations. By imposing penalties on cash transactions, authorities discourage tax evasion and promote transparency in financial dealings.
-
Caps on Cash Payments:
To prevent the misuse of cash and curb tax evasion, there are limits on cash payments for certain transactions. For purchases exceeding Rs 2 lakh, individuals are required to provide PAN and Aadhaar information. Additionally, credit-debit card transactions are limited to Rs 1 lakh to track financial activities effectively. These measures aim to reduce the use of cash in high-value transactions and promote transparency in financial transactions.
-
Family Transactions and Loans:
To prevent the abuse of cash transactions within families and curb tax evasion, there are restrictions on receiving large cash amounts from relatives or borrowing significant sums in cash. Receiving over Rs 2 lakh in cash from a relative in a day or borrowing more than Rs 20,000 in cash from any other individual is prohibited. These measures aim to prevent the misuse of cash for tax evasion purposes and promote transparency in financial transactions.
In conclusion, understanding and adhering to income tax regulations regarding cash transactions is essential for individuals to avoid legal repercussions and ensure compliance with tax laws. By following these rules, taxpayers can contribute to a more transparent and accountable financial system while reducing the prevalence of tax evasion and black money in the economy.
🚀 Ready to level up your finances? Say goodbye to tax woes with Savingz! 🎉
Our app offers effortless tax planning & filing, saving high-income earners like you time and money.
Join now for exclusive CA👩🏻💼 call with us and start maximizing your wealth today! 💰📲 Download Our App Link: https://savz.live/app
Savings starts with Savingz.
A word from our Founder 🚀
