In India, tax evasion has become the norm for many people. The amount of domestic black money is huge which adversely affects the revenue of the Government creating a crunch for various welfare programmes. It creates undue pressure on the honest tax payers. Black money is generally transacted in high value cash transactions. A large amount of unaccounted wealth is stored and used in form of cash.
The historic decision of demonetization on 8th November 2016 was announced to curb black money. People with vast amounts of accumulated black cash now found that the notes had only paper value. Finance Minister Arun Jaitley, in his budget 2017, has proposed several sections to prevent further cash hoarding and black money.
New section 269ST- restriction on cash transactions
According to Section 269ST (applicable from 1st April 2017)-
- One cannot accept Rs. 2 lakhs or more in aggregate from the same person in a day even against different bills.
- One cannot accept Rs. 2 lakhs or more against a single transaction even on different days.
- One cannot accept Rs. 2 lakhs or more from a person for a series of transactions related to one event or occasion.
except through electronic or banking methods like cheque, draft etc.
This section will not apply to-
- any banking company
- post office savings bank
- co-operative bank
- other persons/receipts as may be notified
Transactions referred to in section 269SS (attracted when we accept loan from any person) will be excluded from the scope of the new section 269ST.
- If one sells goods worth Rs 4,50,000 through three different bills of Rs.150,000 each to one person and accepts cash in 1 single day at different times then section 269ST(a) will get violated.
- If one sells goods worth Rs 500,000 through a single bill to another person and receives cash of 2,50,000 on day 1 and another 2,50,000 on day 2 then section 269ST(b) will get violated.
- X accepts an order of catering, decoration and tent for the marriage event of Y. He accepts cash of Rs.1,00,000 for catering Rs 1,50,000 for decoration and Rs.1,50,000 for tent work then section 269ST(c) will get violated even if cash is accepted on different dates. All the cash transactions relate to the same occasion- marriage of Y.
In all the three cases, section 269ST gets violated and penalty u/s 271DA is applicable.
100% penalty for high value cash transactions- Section 271DA
This is another new section in the Budget 2017.
According to this section, any person violating Section 269ST will pay a 100% penalty, i.e., penalty equals to the entire amount of the cash received . This penalty shall be levied by the Joint Commissioner.
Other changes for stricter cash policy
For jewellery bought in cash
Section 206C also stands amended. The earlier provision was tax collection at source at the rate of 1% of sale consideration on cash sale of jewellery exceeding five lakh rupees. Now it doesn’t apply. For any cash sales of more than Rs. 2 lakhs, penalty will apply immediately. Penalty =100% of the amount. So , if anyone pays cash of Rs. 5 lakhs, he promplty becomes liable for penalty. There is no concept of TCS and tax does not have to be collected.
Other cases where TCS is applicable
If someone pays any amount in cash on which TCS is applicable u/s 206C (in cases of sale of liquor, scrap, timber, coal etc.), then he has to supply his PAN to the seller collecting TCS. Otherwise, TCS shall apply at the rate of-
- two times the rate mentioned OR
Thus the government is bringing in more stricter measures to curb the black money and tax evaders that eat up the entire Indian economy.