There are penalty and fine for certain transactions if done in cash. One should avoid doing it in cash.

1. Accepting cash of Rs 2, 00,000 or more in aggregate from a single person in a day or for one or more transactions relating to one event or occasion (269ST) attracts Penalty.

Instead of cash, taxpayers are advised to use an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account for such transactions. However, the said restriction shall not apply to the government, any banking company, post office savings bank, co-operative bank or a person notified by the Central Government.

Section 271DA of the Income Tax Act provides for levy of penalty on a person who receives a sum in contravention of the provisions of section 269ST. The penalty shall be equal to the amount of such receipt. However, the penalty shall not be levied if the person proves that there were good and sufficient reasons for such contravention. It is better not to accept in cash.

2. Don’t receive or repay specified sum exceeding Rs 20,000 or more in cash for loan or deposit or transfer of immovable property as it is violation of section 269SS).  Use an account payee cheque or account payee demand draft or electricity clearing system through a bank account.

 “Specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place. Contravention of the provisions of section 269SS will attract penalty under section 271D. Penalty under section 271D shall be levied of an amount equal to loan or deposit taken or accepted.

3. Payment of more than Rs 10,000 in cash relating to expenditure of business or profession is violation of section 40A(3).

 If such expenses exceeding Rs 10,000 are made in any mode, other than by an account payee cheque drawn on a bank, or account payee bank draft, or use of electronic clearing system through a bank account, no deduction shall be allowed in respect of such expenditure in the profit and loss account.

4. Dononation in excess of Rs 2,000 in cash to a registered trust or political party makes claim u/s 80G invalid. If you do this, then not only you won’t be able to claim deductions under section 80G of the Income Tax Act for such donations,

But appropriate actions would be initiated against the trust or political party for encouraging money laundering.

5. Deduction u/s 80D is admissible only if the mediclaim policy payment is done in any more other than cash. Don’t pay health insurance premiums in cash.

 It is always advisable not to violate the above rules as the Income Tax Department is seeking information regarding such violations, black money or benami transactions. Precaution is better than cure. Let us avoid the cash transactions.