Income Tax Rule: Under Section 269ST of the Income Tax Act, accepting ₹2 lakh or more in cash, even if it is in installments, can attract a penalty of 100 per cent. This means you could lose everything you have received.
Income Tax Rule: Even today, cash is accepted in many places in India. Especially in real estate, business deals and social work, cash is used a lot. But if certain limits are crossed in cash transactions, you may have to lose everything.
Financial advisors and tax experts have warned through social media that large cash transactions can lead to harsh penalties under Indian tax laws. A recent viral post shows how easy it is to break the rules and the consequences can be cruel.
100% penalty can be imposed
In a post on X (formerly Twitter), CA Nitin Kaushik wrote, ‘If you accept more than ₹ 2 lakh in cash, you can lose everything! Do you think you can escape by making payments through different modes? Then think again! Under Section 269ST of the Income Tax Act, accepting ₹ 2 lakh or more in cash, even if it is in installments, can attract a penalty of 100 percent. This means that you can lose everything you have received.’
CA explained how the rule works?
One day limit: Receiving more than ₹ 2 lakh in cash in a day will be considered a violation of the rule. Example: Received ₹ 1.5 lakh in the morning and ₹ 1 lakh in the evening? If the total is ₹ 2.5 lakh, then the penalty will be only Rs 2.5 lakh.
Dividing the payment according to the days? This does not help. Example: Selling a plot for ₹3 lakh and taking ₹1 lakh per day for three days will also be considered illegal.
Wedding and event expenses are counted as one transaction. Example: ₹1.5 lakh for catering + ₹1 lakh for decoration = ₹2.5 lakh fine will be imposed.
Citing a real case, he said, ‘A seller received ₹5 lakh every month for six months for a property deal. Each payment was less than ₹2 lakh, but the total was ₹30 lakh. The final fine was ₹30 lakh.’
How will you not have to pay the fine?
Never accept a cash transaction of more than Rs 2 lakh. No matter how you divide it. Large cash transactions should be avoided in business, property or events. Transactions should be accepted only through bank transfer, UPI or digital payment. Many people break this rule unknowingly and then they have to pay a heavy price.
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