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In a bid to Cashless Economy Mission, the Government has proposed many provision to curb cash transactions in Budget 2017

 

After a few days, the new financial year 2017-18 is being commenced, Government has tightened screw on cash transactions in Budget 2017. Business entity must keep in mind following points, before spending on revenue as well as capital expenditure in cash.

(A) Cash transaction limit reduced to Rs.10000/- under section 40A(3A):

1. Existing threshold limit of cash payment to person Rs.20000/- reduced to Rs. 10000/- in a single day. Provided that payments otherwise than by an account payee cheque/bank draft or use of ECS through a bank account, means cash payment above Rs 10,000 to a person in a day, shall not be allowed as deduction in computing business income.

2. Deeming a payment as profits and gains of business or profession if the expenditure is incurred in a year but cash payment is made in any next year of a sum exceeding Rs 10,000 to a person in a single day.

3. Rule 6DD of the Income Tax Rules prescribes situations where monetary threshold of incurring cash expenditure does not apply.

(B) Cash transaction for capital expenditure more than Rs.10000/-, No Depreciation U/s 43:

It is proposed to amend the provisions of section 43 of the Act to provide that where an assessee incurs any expenditure for acquisition of any asset in respect which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft or ECS through a bank account, exceeds Rs.10000/-, such expenditure shall be ignored for the purposes of determination of actual cost of such asset.

(C) Cash transaction for capital expenditure more than Rs.10000/-, No Deduction U/s 35AD:

It is proposed to amend the provisions of section 35AD of the Act to provide that any expenditure in respect of which payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or ECS through a bank account, exceeds Rs. 10000/-, are not eligible for deduction in respect of expenditure incurred on setting up of a Specified Business.

This amendment is effective from financial year 01-Apr-2017, in relation to Assessment year 2018-19 and subsequent years.

(D) Cash receipt restricted to 3 lakh rupees u/s 269ST  & 271D:

The new Section 269ST has been proposed in The Finance Bill, 2017, that no person, except the Government, any banking company, post office savings bank or co-operative bank shall receive in cash, an amount of 3 lakh rupees or more, from a person in a day, in respect of a single transaction for a single event or occasion.

A new Section 271DA has been proposed, to impose a 100% penalty on a person who receives a sum in contravention of the new Section 269ST. Means penalty will be equivalent to the amount of such receipt.

This amendment is effective from financial year 01-Apr-2017, in relation to Assessment year 2018-19 and subsequent years.

(E) Restriction on Cash Donation u/s 80G:

To promote cashless Economy it is proposed to amend section 80G to provide that no deduction shall be allowed in respect of donation of amount exceeding of 2000 rupees paid in Cash.

This amendment is effective from financial year 01-Apr-2017, in relation to Assessment year 2018-19 and subsequent years.

(F) Contribution to Political Party u/s 13A:

It has been proposed in Budget 2017 that in respect of voluntary Contribution of Rs.2000 or more by cash to political party is banned. The political party has to maintained record of donor who contributed in excess of Rs.2000 or more by Cash (Current limit is Rs. 20000/-)

Electoral Bond to be introduced for facilitating donation to political parties from explained sources.

Political parties to file their return in time limit prescribed in the Income Tax Act.

These amendment  shall apply from the financial year beginning from FY 2017-18

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5 thoughts on “Cash transaction related proposals in Budget 2017

  1. rajeshgarg says:

    Some trade has practice to give free goods with sales goods to promote there sale, please clear is it permitted in GST

    1. ANIL PANCHAL says:

      If free promotional item is provided with the taxable product than the consideration for the same will be value charged from the consumer. The promotional item given free to end consumer, than tax will be charged on the total consideration charged for such supply.

      1. rajeshgarg says:

        Dear Anil ji
        Can you explain your answer with example. Here suppose we sell 10 pair shoes @300/= with 2 pairs free with this supply then we will issue invoice for 10+2 @300.00 = Rs.3000.00 +GST @5% Rs.150.00 The total invoice value is Rs.3150.00
        Now clear me in this way

  2. rajeshgarg says:

    Please clear the limit of a cash memo which can be issued to an unregistered person

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