The Income Tax Act, 1961 in India had various provisions related to cash transactions to curb black money and promote transparency in financial transactions. Please note that tax laws and limits can change over time, here were some important cash transaction limits and provisions under the Income Tax Act:
- Section 269ST: Any cash transaction above Rs. 2 lakh in a single day was prohibited. This means that you cannot receive or repay a loan, deposit, or any other sum exceeding Rs. 2 lakh in cash.
- Section 40A(3): This section disallowed business expenses exceeding Rs. 10,000 paid in cash. This means that you cannot claim a deduction for business expenses if the payment is made in cash exceeding Rs. 10,000 in a day.
- Section 269SS: If you receive a loan or deposit of Rs. 20,000 or more in cash, it is prohibited under this section. Repayment of such loans should also not be in cash exceeding Rs. 20,000.
- Section 269T: This section prohibits repayment of loans or deposits in cash if the amount is Rs. 20,000 or more. Such repayment should be made through non-cash modes.
- Section 44AB: If you are a taxpayer subject to tax audit under section 44AB, you must maintain prescribed books of accounts. Cash payments exceeding Rs. 10,000 in a day for expenses are not allowed as a deduction.
- Section 271D: If you violate the provisions of Section 269SS by receiving a loan or deposit in cash exceeding Rs. 20,000, you may be liable to pay a penalty of an amount equal to the loan or deposit so taken or repaid.
- Section 271E: If you violate the provisions of Section 269T by repaying a loan or deposit in cash exceeding Rs. 20,000, you may be liable to pay a penalty of an amount equal to the loan or deposit so repaid.
- Section 206C: This section requires the seller to collect tax at source (TCS) if the sale of specified goods or services is made in cash, and the amount exceeds Rs. 2 lakh. The TCS rate varies depending on the type of transaction.
- Section 285BA: Any person who is responsible for registering, maintaining, or reporting financial transactions (like banks and financial institutions) should report high-value transactions to the income tax department. The threshold for reporting varies depending on the type of transaction.
- Section 40A(3A): If you are in the business of trading in commodities, you cannot make payments exceeding Rs. 10,000 in cash in a day to a person in respect of a single transaction for the purchase of agricultural produce.