Ban on cash transaction above Rs2 lakh not applicable for bank, post office withdrawals
Income tax department said ban on cash transaction in excess of Rs2 lakh will not be applicable to withdrawals from banks and post office savings accounts
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New Delhi: Ban on cash transaction in excess of Rs2 lakh will not be applicable to withdrawals from banks and post office savings accounts, the income tax department said on Wednesday.
Through the Finance Act 2017, the government has banned cash transactions of over Rs2 lakh and said a penalty of an equal amount would be levied on the receiver.
In a clarification on the newly inserted Section— 269ST—in the I-T Act, the Central Board of Direct Taxes (CBDT) said the restriction shall not apply to withdrawal from banks and post offices.
“It has also been decided that the restriction on cash transaction shall not apply to withdrawal of cash from a bank, co-operative bank or a post office savings bank,” the statement said. It said necessary notification in this regard would be issued.
In the 2017-18 Budget, finance minister Arun Jaitley had proposed to ban cash transaction of over Rs3 lakh. This limit was lowered to Rs2 lakh as an amendment to the Finance Bill, which was passed by the Lok Sabha last month.
The said restriction is also not applicable to any receipt by government, banking company, post office savings bank or co-operative bank, the CBDT said. The move to ban cash transaction above a threshold was aimed at curbing black money by discouraging cash transaction and promoting digital economy.
According to the rule, no individual can deal in cash in excess of Rs2 lakh on a single day, in respect of a single transaction or in respect of transactions relating to one event or occasion from an individual.
The Finance Act also provides that any capital expenditure in cash exceeding Rs10,000 shall not be eligible for claiming depreciation allowance or investment-linked deduction. Similarly, the limit on revenue expenditure in cash has been reduced from Rs20,000 to Rs10,000.
In order to promote digital payments in case of small unorganised businesses, the rate of presumptive taxation has been reduced from 8% to 6% for the amount of turnover realised through cheque/digital mode. Also, it has restricted cash donation up to Rs2,000 for political parties for availing exemption from Income-tax. “Further, it has also mandated that any donation in cash exceeding Rs2,000 to a charitable institution shall not be allowed as a deduction under the Income-tax Act,” the CBDT statement said.