Here is the brief on amendments relating to cash transactions which will take effect from 1st April 2017.
- Restrictions on cash transactions above Rs. 3,00,000/-
From 1st April onward any transaction (including transactions for capital assets) above Rs. 3,00,000/- shall be strictly done only through banking channels.
There is a heavy penalty of amount equivalent to transaction amount above Rs. 3,00,000 if any transaction above Rs. 3,00,000/- is done in cash.
For eg., if you sell your car for Rs. 5,00,000/- and receive the amount in cash. The amount of penalty levied on you will be Rs. 2,00,000/- .
Note that penalty is imposed on receiver of cash.
- Restriction on cash donations to charitable trusts.
Deduction at the rate of 50% is granted in case donation is made to a registered charitable or religious trust.
From 1st April, any donation above Rs. 2,000/- in cash will not be eligible for tax deduction under Sec 80G of the income tax act. Earlier this limit was of Rs. 20,000/-
Hence, if you want to make any donations and take income tax benefit of the same you have to ensure that you make such donations through banking channels
- Restriction on cash expenses above Rs. 10,000/-
Any expense of above Rs. 10,000/- done in cash will be disallowed. Earlier, this limit was of Rs. 20,000/-.
- Restriction on Capital Expenditure done in cash
From 1st April onwards, Cash payments of above Rs. 10,000/- done for purchase of capital asset will be disallowed. I.e. they cannot be added in the cost of asset for Income Tax purposes hence, depreciation cannot be claimed on same.
You will have to ensure that payment for purchase of any capital asset of more than Rs. 10,000/- shall be done only through banking channels.
- Cash Books during assessments-
Further, considering the fact that government wants to discourage cash transactions it is likely that cash transactions will be looked upon in detail.
Hence, one is expected to maintain proper cash books.
Please note that all above changes will come into effect from the dates mentioned above after Assent of Finance bill 2017 by Honorable President of India and till that time these are proposed amendments.