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With the new wave of going cashless, a new Section 269ST has been proposed by union government in the Financial bill 2017. It is bringing a great change in the Indian economy as not only affecting the every-day life of commoners but also the upper crust. The reason is placing of restriction over receiving cash from a person beyond a certain limit. Further, Penalty for violating the provisions of this section is too high.
We will discuss everything about it in this blog so If you know just a little bit or nothing about it then you have come to the right place. We will guide you through it by answering all your concerned questions. Let's first understand:
This section concerns only those people who are receivers. It means, receivers of the cash will be the one getting affected not the person who gives it. It is in effect from this financial year i.e. from 1st April, 2017.
Let's see what it states:
Section 269ST states that no person shall receive an amount of Two lakh rupees or more,
otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account.
Confused? It's okay we will explain you about it step by step and part by part. So let's first begin with the part (a)
a) In aggregate from a person in a day
This simply states that a person cannot receive 2 lakh in cash, even if the transaction is in 2 different bills from the same person. Suppose you are a jeweler, now if someone buys a jewelery from you of 3 lakh in cash. Then the penalty will be on you as you are the receiver. Even if you try to split the bill, the entity will remain same.
On the other hand, it is okay if the amount is received from two different person and the amount received from both is less than the specified limit. Suppose from one person you receive Rs. 1.75 lakh for a jewelry and from another person you receive cash of Rs. 50,000 for other item. Then it's not a violation of section.
Now let's move to part (b)
b) In respect of a single transaction
You probably are aware of contractors and that they receive payment only when some percentage of their work gets complete. Their most of the payment is cash receipt based and even they require cash regularly for wages, material, day to day needs etc. Well now in a single contract they can't receive cash more than Rs. 2 lakh, even if the contract is of 1 year or 5 years. All the transactions has to be done either by draft, cheque or bank to bank electronic transfer.
And let's understand the last part (c)
c) In respect of transactions relating to one event or occasion from a person
If you're an Indian then you are surely aware of the weddings and the part cash plays in it. Well occasions or events like that will also come under these section. Since it is not specifically mentioned that means that it's applicable everywhere. Hence cash gifts received on any event, that were a part of exempt income, may also be taken into consideration under this section. Don't you agree it's a good step taken towards abolishment of the dowry system in India?
So then how can a person receive an amount more than of 2 lakh?
Well that is what it said in the last line that you can receive an amount more than of 2 lakh by cheque, or by bank overdraft or by ECS.
ECS is the electronic transfer of amount from one bank account to another .i.e. through Internet banking.
The penalty imposed on breaking the law, is the 100% of the amount . This means that if you don't follow the rule mentioned in Section269ST and get caught into the scrutiny of the tax department then penalty on the transaction will be equal to it. Suppose in case, the transaction was of 5 lakh then penalty will be of 5 lakh.
There was panic among people that what if they want to withdraw cash from bank? Because in that case they become the receiver. According the recent press release, it has been clarified by tax department that common man can withdraw any amount from bank. In this case, penalty will not be levied under Section 269ST.
Yes this section is not applicable on
In a nutshell, government is trying to restrict the big transactions held in cash by anyone even if it's a firm or company or individual. The lesser the transaction in cash more they ( government ) will be able to control black money market. Even they have restricted every possibility of escape from this section. We hope this will bring some positive changes in India and will help it to move forward.
If you are withdrawing any amount in cash from bank then there is no restriction. It has been officially announced that Withdrawing cash from bank will not be considered in it.
The section will be violated in this case because as it states in part (a) that in a single day from a single person the total amount can't exceed 2 lakhs. Moreover, Penalty is on receiver, not on payer.
It may be that, this section is applied on both taxable and exempt income. This means that gifts received from relatives may also be considered under Section 269ST. Hence in order to comply with this section no gifts should be received in cash above 2 lakh from relatives.
Read more about 10 tax changes impacting new F.Y. 2017-18.
If you have any queries or suggestion regarding this blog, let us know in comment section. We would love to help you out!!
