All about Cash receipt exceeding Rs 2,00,000 under Income Tax Act

All about Cash receipt exceeding Rs 2,00,000 under Income Tax Act

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There are various provision inserted via Finances Act to put a limit on Cash Transaction for a check on Black Money and Tax Theft, below are the following provision applicable to Assesses (Liable for Audit u/s 44 AB of the Act)

SECTION 269ST

PROVISION OF SECTION 269ST:

No person shall receive an amount of two lakh rupees or more—

(a) in aggregate from a person in a day; or

(b) in respect of a single transaction; or

(c) in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account.

EXCEPTIONS provided to following entity from above Provision:

(a) Government;

(b) Any banking company, post office savings bank or co-operative bank;

(c) Transactions of the nature referred to in section 269SS;

(d) Such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specifies.

SECTION 285BA (FORM 61A)

SFT under Section 285BA read with Rule 114E of Income Tax Act 1961

As per section 28​5BA of the Income-tax Act, 1961 (as substituted by Finance Act, 2014 w.e.f. 01-04-2015), specified entities (Filers) are required to furnish a statement of financial transaction or reportable account (hereinafter referred to as ‘statement’) in respect of specified financial transactions or any reportable account registered/recorded/maintained by them during the financial year to the income-tax authority or such other prescribed authority.

Section 285BA of Income Tax Act 1961 cast a responsibility on the persons which are covered under rule 114E to furnish such records within the time specified.

The Rule 114E prescribed under the reporting transactions and persons that need to file such records to Director/ Joint director of Income Tax (Intelligence and Criminal Investigation)

S.no. Nature of transactions Reporting Entity
1 Receipt of cash payment by any person for sale of goods or supply of services of any nature exceeding Rs2,00,000 Any person who is liable for audit under section 44AB of the Act.

*Aggregation rule is not applicable for above transaction type i.e. Rs. 2,00,000 to be consider only for single transaction entered by Assesse in which he receive amount in Cash only.

Section 206C- Tax Collected at Source:

TCS is the Tax Collected at Source by the seller (collector) from the buyer (collectee)”. Every person, being a seller, shall collect tax at source (TCS) from the buyer of goods specified in section 206 C (1).

Finance Act, 2016 imposed TCS on sale of goods or services on receiving consideration in cash with effect from 2016, June 1. Finance Act 2016 has made the following amendments in section 206C of the Act: –

In order to reduce the quantum of cash transaction in sale of any goods and services and for curbing the flow of unaccounted money in the trading system and to bring high value transactions within the tax net, it is proposed to amend the Section 206C of Income Tax Act,1961 to provide that the seller shall collect the tax at the rate of one per cent(i.e. 1% of sale value) from the purchaser on –

 Sale of motor vehicle of the value exceeding ten lakh rupees (Where amount is received by cash, cheque or any other mode); or

 Sale in cash of any goods (other than bullion and jewellery), or providing of any services (other than payments on which tax is deducted at source under Chapter XVII-B) exceeding two lakh rupees. (Amount of consideration is received in cash or partly in cash only).

(In above even if part payment is been made in cash than TCS will be collected on Full amount)

Note: The limit of Rs.2 lakh would apply for each transaction or bill of purchase or expense separately, and therefore, though all the transactions put together for the year may exceed the limit, if each transaction of purchase or expense is below Rs.2 lakh, the provisions of TCS would not apply.

TAX AUDIT REPORT (3CD):

Clause 31 of Reporting seeking particulars of receipts or payments made in cash or cheque or bank draft (not being account payee cheque or account payee bank draft) exceeding the limit specified4 in section 269ST of the Act. Auditors require to report details of all such receipt or payment to Taxation Authority.

Clause 42 of Reporting require Form No. 61A (SFT by specified reporting persons) and Form No. 61B (Statement of Reportable Account by prescribed reporting financial institution, as per section 285BA of the Act). Auditors are require to report all those transaction, which are not reported under Form no. 61A/61B.

Sec 269ST will applicable when amount receive otherwise than by account payee cheque or an account bank draft or use of electronic clearing system through a bank account. However, Sec 285BA and Sec 206C (TCS provision) will be applicable on cash receipt basis only.

There is myth among various Stakeholders that the limit of Rs 2,00,000, calculated on aggregate basis. Actually it is not, 2 Lac limit as per above all Provision is to be computed majorly on single transaction basis.

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