The government has decided to restrict the limit of cash transactions to R2 lakh from April 1, further tightening a Budget proposal that had kept the limit at R3 lakh, to curb the black money menace. “The penalty for violating this is a fine equivalent to the amount of transaction,” revenue secretary Hasmukh Adhia tweeted on Tuesday, when the Lok Sabha was debating the Finance Bill 2017. Any cash transaction beyond R2 lakh will be illegal, he said, adding the proposal is part of the official amendments to the Finance Bill 2017.
Presenting the Budget for 2017-18, finance minister Arun Jaitley had proposed to insert Section 269ST in the Income Tax Act to state that “no person shall receive an amount of R3 lakh or more by way of cash in aggregate from a person in a day; in respect of a single transaction; or in respect of transactions relating to one event or occasion from a person”.
However, such restrictions were not to be applicable to the government, any banking company, post office savings bank or co-operative bank. With this limit, the earlier provision of imposing a 1% tax at source for sale of jewellery over R5 lakh in cash will be omitted, according to the Budget documents.
Jaitley had also said the government had decided to accept the recommendation of the special investigation team (SIT) on black money that no transaction above R3 lakh be allowed in cash.
Illustrating the concept of penalty on cash transaction, Adhia had earlier told PTI that if someone buys an expensive watch beyond the stipulated limit in cash, it is the shopkeeper who will have to pay the tax. The government will track large cash transactions and check avenues of conspicuous consumption through cash, he had said.