Income Tax News: People Doing Cash Transactions Beware! IT Dept Can Impose Penalty Up To 100%

The government is actively encouraging digital transactions by imposing strict limits on cash dealings. Under the Income Tax Act, 1961, exceeding these limits can result in severe penalties. Many individuals unknowingly violate these rules, leading to hefty fines imposed by the Income Tax Department, which closely monitors large cash transactions.

Penalty for Exceeding Cash Transaction Limits

According to the Income Tax Act, if cash transactions exceed a specified limit, the violator may be fined an amount equal to the cash paid. The Income Tax Department issued a brochure on January 2, 2025, emphasizing the importance of digital payments and urging people to say "No" to cash transactions.

Key Cash Transaction Rules Under the Income Tax Act

1. Section 269SS: Restrictions on Accepting Loans, Deposits, and Specified Amounts in Cash

No person can accept a loan, deposit, or specified sum in cash if the total amount is Rs 20,000 or more.

"Specified sum" includes advances related to the transfer of immovable property.

Exceptions: Government banking companies, post office savings banks, cooperative banks, government corporations, and institutions specified under law.

Penalty for violation: Under Section 271D, an equivalent amount of the transaction will be imposed as a fine.

2. Section 269ST: Prohibition on Receiving Rs 2 Lakh or More in Cash

A person cannot receive Rs 2 lakh or more in cash in a single day from a single person.

This rule applies to all individuals, regardless of tax liability.

Cash transactions above Rs 2 lakh are not allowed for a single event or occasion (e.g., weddings, birthdays).

Penalty for violation: Equal to the cash amount received.

Who Must Follow These Rules?

These restrictions apply to transactions involving educational institutions, hospitals, religious donations, and dealings between related persons, unless both the payer and receiver are tax-exempt.

Violating these regulations can lead to substantial financial penalties. Therefore, individuals and businesses must stay informed and opt for digital transactions to avoid legal and financial consequences.