Cash transactions have traditionally played a significant part in the Indian economy and are a persistent cause of the accumulation of black money. The government has set various limits on cash transactions from time to time in order to combat black money.
Paying or receiving cash in excess of these limits is punishable by a steep penalty of up to 100 percent of the amount paid or received.
Cash transactions over Rs 2 lakh are not allowed for any reason, according to Indian income tax regulations. For instance, you must use a check, credit card, debit card, or bank transfer to pay if you want to buy gold jewellery for Rs 3 lakh in a single transaction.
You must abide by this rule even if you receive money from any family members. The government has made it illegal for anyone to take cash worth more than Rs 2 lakh under Section 269ST in order to reduce the use of cash in high-value transactions. This means that a person cannot accept more than Rs 2 lakh in cash in a single day, not even from close family.
One cannot accept even a cash gift of more than Rs 2 lakh from a single donor on a single occasion. Those who accept cash in excess of Rs 2 lakh in violation of this clause may face a penalty equivalent to the amount received.
Make sure you don’t pay for health insurance in cash while tax planning. If a taxpayer pays their insurance premium in cash, they are not eligible for the Section 80D deduction. It is required to be done through the banking system.
If a person takes a cash loan from a financial institution or a friend, the total amount cannot exceed Rs 20,000. The same regulation applies to debt repayment. The repayment of a Rs 20,000 loan must be made through a financial channel.
The most cash that can be used in a real estate purchase is also Rs 20,000. Even if a seller takes an advance, the limit stays the same.
Taxpayers who are self-employed are not permitted to deduct any expenses that exceed Rs 10,000 if they were made in cash to a single person in a single day. The law sets a greater limit of Rs 35,000 as the amount that can be paid to a transporter.
