Strict income tax rules: In today’s time, when almost everything is done through digital payment, many people still do cash transactions – whether it is household expenses, giving a gift or business work.
But do you know that the Income Tax Department has set a limit for cash transactions in a day? If you breach this limit, you may receive a direct tax notice and may also be charged a heavy fine.
Preparation to control black money
The Government of India and the Income Tax Department are now strictly monitoring cash transactions. Its purpose is to stop black money and tax evasion.
Many times people withdraw or deposit large amounts of money in cash without knowing, which can prove to be a violation of tax rules. Therefore, it is very important to know how much cash is legally acceptable to take or give in a day.
Ban on cash of more than Rs 2 lakh, applicable to gift-loans
According to Section 269ST of the Income Tax Act, a person can do cash transactions only up to Rs 2 lakh in a day.
This means that if you take or give more than Rs 2 lakh cash from any one person in a day, it will be considered a direct violation of the rules.
This rule applies to all types of transactions – be it gift, loan or business payment. For example, if you gave or took Rs 2 lakh in cash from someone, the Income Tax Department can keep an eye on it and send you a notice.
If 2.5 lakh cash is taken then 2.5 lakh penalty!
If you violate this rule, the Income Tax Department can impose a penalty of the same amount as the amount you have taken in cash.
For example, if you took Rs 2.5 lakh in cash from someone, you may have to pay a fine of Rs 2.5 lakh.
This penalty is imposed under Section 271DA of the Income Tax Act. This fine is imposed on the person taking it, not on the person giving it.
Why did the government bring these strict rules, tracing will be easy
The government has made this rule to prevent black money and tax evasion. Large cash amounts are difficult to trace, so the government wants all large transactions to be through bank transfer, check or digital means so that everything can be traced.
Even if the transaction is personal, like giving money to a relative or friend, if the amount is more than Rs 2 lakh, it can be investigated by the Income Tax Department.
AI’s eyes are watching you
The Income Tax Department now monitors all transactions through an AI based data analysis system. If more than Rs 10 lakh is deposited or withdrawn in a year in someone’s savings account, or if there is movement of more than Rs 50 lakh in the current account, then the system sends an alert.
Not only this, if a person repeatedly tries to avoid the limit by making cash entry of less than Rs 2 lakh, then it can also be considered as a “suspicious transaction” and investigated.