Government is taking lots of effort to avoid cash transaction. The police officer has given right to check vehicles and other places and cease cash if occurred. If cash above Rs. 10 Lakhs is ceased then it is submitted to Income tax department for enquiry. Also during the two months of Elections, if deposit or suspicious cash is deposited or withdrawn from the bank account exceeding Rs. 10 lakhs then Bank have to inform the same to Election Officer. Further if amount exceeding Rs. 1 lakh is transacted by the Candidate or the person mentioned in the affidavit then the same is required to be informed the Election Officer. Apart from this there are restrictions of Income Tax act.
While incurring expenditure for business i.e. for purchasing goods or incurring expenditure and availing deductions cash payment of more than Rs. 20,000/- per day should not be made otherwise deduction will be disallowed as per section 40 (A) (3) of the Income Tax Act and tax will have to be paid such expenditure. If Businessman has made purchases of Rs. 1 lakh from “A” then he can make cash payment of Rs. 20,000/- in a single day. For making payment to transporter of goods the limit is Rs. 35,000/-. The following are some of the exceptions for making payment beyond limit i.e. businessman can make payments exceeding Rs. 20,000/- as given in Rule 6DD of the Income Tax Act.
1) Payments to Government for e.g. sales tax, excise, customs payments
2) Payments made in the villages or places where there is no Bank
3) The day on which payment made is bank holiday
4) Payment made to farmer for Agricultural products, Milk and poultry farming, etc.
5) besides this, Capital expenditure can be made in cash.
According to section 269 SS and 269 T of the Income Tax Act the taxpayer cannot accept or repay the loan in cash exceeding Rs. 20,000/-. If the taxpayer has accepted or repaid loan in cash exceeding 20,000/- then the auditor has to report the same in tax audit report. If it comes to the notice of Income Tax officer then he may levy penalty. If loan acceptor or donor both are farmers and their receipts are not taxable according to Income tax Act then above provision is not applicable to them. If the loan accepted is more than Rs. 20,000/- then repayment cannot be made in cash.
Cash is fluctuating. From where cash came and gone that no one knows. But if transaction took place though bank the details of the same remains for long time. Many taxpayer for evading taxes incur transactions in cash and later on get involved in tax laws. Due to which more taxes and penalty have to be paid. Therefore maximum transactions should be made through bank and should avoid transactions in cash. Businessman says “Aaj Nagad Kal Udhar” but if more transactions are incurred in cash then problems will have to be faced.