Cash transactions are not restricted by the CGST Act of 2017, but the Income Tax Act of 1961 periodically imposes restrictions on cash receipts, payments, and withdrawals in order to combat black money.

Through the Finance Act 2020, the government amended clause 84 of Section 194N. For cash withdrawals of between 20 lakhs and 1 crore, banks (public, private, cooperative) and post offices must deduct TDS at 2% if the withdrawer has not filed a tax return in three years. TDS of 5% applies to cash withdrawals exceeding Rs 1 crore. is obligated to be subtracted.

Additionally, according to Section 269ST of the Income Tax Act of 1961, no one may receive more than Rs. 2,000,000:

(a) In aggregate from a person in a single day  : Mr . A sold an item amounting to Rs 2,50,000/- to Mr B and received 5 installments of Rs 50000/- in a single day . He has received more than Rs 2,00,000/- in a single day. 

(b) In respect of a single transaction : In the example above , if Mr. A receives 5 installments in 5 days , still the transaction covers under sec 269ST of Income Tax Act  as amount received against a single transaction. 

(c) In respect of transactions relating to one event or occasion from a person : A caterer receives cash of more than Rs. 2 lakh in respect of a marriage even if separate bills are made and payment are received on separate days.

Note :  The Cash Transactions Limit is applicable on receiver and not the payer. 

Non Applicability of section 269ST  :  This section is not applicable on

(i) Any receipt issued by the government, a banking company, a co-operative bank, or a post office savings bank; 

(ii) transactions of a nature described in Section 269SS (Section 269SS addresses provisions pertaining to receiving a loan or deposit from a specified person); and 

(iii) any other individuals or classes of individuals or receipts that the Central Government may specify through an Official Gazette notification.

In a press release from April 5, 2017, the CBDT made it clear that withdrawals from banks, cooperative banks, and post offices are exempt from the aforementioned cash transaction limit of Rs 2 lakh.

Under Section 271DA of the Income Tax Act, the receiver is required to pay a penalty equal to the amount of the receipt. If the offender can demonstrate that there were sufficient justifications for the violation, no penalty will be inapplicable. Additionally, the receiver receives the penalty, not the payer.

Other relevant points related to the provision under section 269ST of I Tax Act 1961 

(a) Penalty would be levied even if the defaulter does not have PAN. 

(b) Bearer cheque and self cheque will also be considered as cash for the purpose of this provision . 

(c) Restriction under section 269ST is applicable even if amount if received for personal Purpose and not for business purpose.

EXPENSES MADE WITH CASH: According to Income Tax Act of 1961, section 40A(3), any expenditure for which a single person receives more than Rs.10,000 in a single day without using an account payee cheque, account payee bank draft, or electronic clearing system through a bank account cannot be deducted.

Edge Breaking point – Money installment surpassing Rs 10,000 to an individual in a solitary day. The cap has been raised to Rs. 35,000 if payments are made for a single day’s plying, hiring, or leasing of goods transportation.

Section 40A.3: The use of an electronic clearing system through a bank account or a payment method other than an account payee cheque, account payee bank draft, or a single payment of more than Rs. 10,000/- per day to a single person is prohibited as education.

FAQs

Under GST, is there a limit on cash transactions?

Hello, readers! Today, I will discuss a topic that is both very confusing and very important: the limit on cash transactions under the GST/INCOME TAX ACT. Under the GST, there is currently no provision that restricts cash transactions. Section 269ST of the Income Tax Act was implemented in 2017.

What are the main sections of the income tax that deal with the cash transaction limit?

Coming up next are the principal personal duty segments that relate to cash exchange limit: Area 269T – Relates to Reimbursement of Specific Advances/Stores Segment 40A (3) of the Personal Assessment Act relates to cash exchange limit for use made in real money.

Does CGST Act 2017 limit cash exchanges?

CGST Act 2017 has no arrangement limiting money exchanges, however to, control dark cash ,the public authority has forced different limitations on cash receipts/installments and money withdrawal occasionally through Annual Assessment Act 1961. Through the Finance Act 2020, the government amended clause 84 of Section 194N.

Is dealing in cash a violation of the Constitution?

Keep in mind that dealing in cash is not prohibited by the Constitution; the income tax department does, however, assess cash transactions differently and impose penalties on those who do so. The maximum amount of cash that a person can receive is limited to Rs. by Section 269ST. 2,00,000 that an individual can get.

Disclaimer: The materials provided herein are for informational purposes only and do not constitute legal, financial, or professional advice. Consult relevant laws and experts before acting on this information. Neither the author nor K M GATECHA & CO LLP is liable for any inaccuracies or omissions. This material is purely educational and not an advertisement or solicitation.