Indian Government is all focused on curbing black money operations in India and have made many restrictions for cash transaction and tax deduction for the current financial year. In recent union budget, it was announced by the finance minister that a cap will be applicable for cash transaction from the starting of Financial Year 2017-18. This cap was imposed on cash transactions above INR 3, 00,000. Transaction above this limit must be done through banks only. Amendments to Restrict High Value Cash Transactions. Let’s find out the ways to exercise your tax benefit.
A new section 269ST will be inserted into the IT Act which will have few conditions on cash transaction above INR 3 lakhs. The conditions are:
- No one should receive amount above this limit in a day in total from any person
- No one should receive any amount above this limit in a single transaction.
- For any event or occasion, such transaction over INR 3 lakhs should be done through bank channels.
Also, heavy penalties have been declared for cash transaction above this limit which is 100%. So, if anyone does a cash transaction for INR 4 lakhs then the penalty will be INR 4 lakhs. This penalty will be imposed on the cash receiver, but not on the cash giver as this will control cash transactions better. Moreover, this restriction will be imposed on few income tax benefit instruments like donations.
According to the deduction rules, anyone can avail deduction up to 50% for a donation made to a charitable trust. But, from now, no donation above INR 2,000 will be eligible for claiming tax benefits under section 80G. The limit for donation to claim tax deduction was INR 20,000 before this cash transaction rule came out. This curb on donation has been drawn to reduce the chances of claiming tax benefits by making donations with black money. So, from now on, one need to do all donation transaction through banks if they want to claim any income tax benefit against that. New Amendments in Income Tax Rules for Charitable Trusts.
The cash transaction limit will be also applicable for expenses over INR 10,000, which was INR 20,000 earlier. These expenses categories include all capital asset purchasing which means no depreciation can be claimed for such transaction. For purchasing such capital asset, one must use bank channels to complete the transaction above this limit in order to claim any tax deduction.
All these changes will come into effect from 1st April 2017 after The President of India gives his ascent ti these proposed amendments.