Limits on Cash Transactions

Every single day we are taking a step towards a more digital future when it comes to business transactions, cash transactions used to be an inevitable part of the story. But since demonetization government has been pushing cashless transactions so hard that finally, we are seeing our life getting more and more cashless. But still, there are cases where businesses indulge in cash transactions, here are few reasons why going digital can keep your business compliant:

Limits On Cash Transactions:

The Income Tax act has various provisions which avoid people dealing in cash transactions which can be easily broken down into the following:

Disallowance of Cash Expenditure

Any expenditure which exceeds 10,000 INR in a single day has to be made through an account payee Cheque or a bank transfer.  Contravening this provision will lead to disallowance of such expenditure entirely.

Prohibition of Cash Loan

Any loan of 20,000 INR or above has to be made through an account payee Cheque or a bank transfer. Contravening this provision can attract a penalty of 100% of the amount of the loan. This section also includes advance if any made for buying any property or renting a property.

Prohibition of Receipt of Cash

Receipt of any nature if it is 2,00,000 INR or more by a single person in a single day has to be made through banking channels, contravention of this provision can attract heavy penalties.

Save Tax By Going Digital:

Government as a step towards promoting digital payments for small businesses has added a benefit for businesses adopting presumptive taxation. If you are a business taking the advantage of the presumptive income scheme under section 44AD, where your profit is presumed to be 8% of your total turnover.  In such a scenario for your part of receipt which is done through banking channels, the presumptive income can be taken at 6%, thereby saving tax.