Govt To Charge 100% Penalty On Cash Transaction Above 3 Lakh Rupees

As a new economic reform in Budget FY-17, PM powered Finance Minister Arun Jaitley to announce a legal ban over cash transaction above Rs 3 lakh to get effected from the coming year 2017-18.The reason he explained behind such decision was to curb all such funding activities of businesses which are executed in an unaccounted cash medium and to establish a proper mechanism for identification of the sources of funds used, for tax purposes.

FM further highlighted that present Indian economic structure transacts more than 60% of the total business activities in cash which is creating some deep holes for black money sources and weakening the govt digitization objective. Also, the fact that huge black money holding lies in the economy within a short human group, necessitated the govt to take a strict policy action against them.

Hence In order to make it more comprehensive and rigid this time, Govt  presented the Ban over Cash transaction strategy and levied an additional penalty of 100% of amount in it, in case guilty found transacting above the 3 lakh limit, with cash.

This is not the end yet! There is more to know about this change.

The new rule is proposed to be defined under Section 269ST of the Finance Bill 2017 which says :-

  1. a) No person shall take any amount in cash, valuing 3 lakh or above

(i) In total, in a single day

(ii) In a single transaction

(iii) From a single person

(iv)  In relation to a single event or occasion 

  1. b) provided that present rule shall not be applicable for

(i) Any banking company, post office, cooperative or saving bank dealings

(ii) Transactions being done by govt or any official employee approved by govt

(iii) For transactions defined under 269SS

While the above rules bound the movement of cash, there is no such restriction on transacting above the limit through issue of cheques, drafts, RTGS or making usage of any legal negotiable instrument approved by govt.

The impact of this cash ban agenda will make you think “What if the rule is violated?”

 To get a detailed study of section violation, you must read the below situations:

  • Accepting 3 lakh or more from a single person in a day, even against different bills violates the rule.
  • Accepting 3 lakh or more against a single bill, but on different days violates the proposed rule.
  • Accepting 3 lakh or more from a person against transactions relating to a single event or occasion violates the rule.

For a transaction if listed to be above the prescribed limit (3 lakh) would be penalized under a new Section 271DA and the penalty amount shall  range from 100% of the amount transacted to an amount as defined by Joint Commissioner.

Explain me with some assumptions!

 As an example let’s see how the made amendment applies to an ordinary dealer of goods:

  • If the dealer sells the goods worth Rs 450000 through three different bills of Rs 150000 each to one person and accept cash in a single day the rule is violated under section 269ST (a)
  • If the dealer sells the goods worth Rs 400000 against a single bill and accept cash Rs 200000 on one day and Rs 200000 the other day the rule is violated under section 269ST (b)
  • If the dealer is providing resources for an occasion or an event : if he receives separate amount for separate activities including Rs 100000 for catering, Rs 150000 for tent facilities, Rs  90000 for decoration, Rs 30000 as rent charges etc the rule is violated under section 269ST (c) as all transactions pertain to a single event

The above article is an overview to the govt decision of Ban over Cash transaction above 3 lakh, we have tried to explain it with some basic assumptions while some unpredictable situations can also arise which may lend a person to a 100% penalty .