income tax

Know When to Say No to Cash Transactions: Benefits and Regulations Explained

Introduction

The second edition of "Know When to Say No to Cash Transactions" aims to provide readers with a comprehensive understanding of the evolution of cash transactions, highlighting the preference for cash over alternative methods and the inherent flaws associated with cash flow. This edition also delves into the numerous advantages of transitioning to cashless transactions for both individuals and businesses.

Chapter Overview

1. Introduction

This chapter discusses the historical evolution of cash, reasons for its continued preference, the flaws associated with cash flow transactions, and the numerous benefits of adopting cashless transactions.

2. Restrictions on Expenditure (Capital & Revenue)

This chapter focuses on the disallowance under Sections 40A(3) and 40A(3A), detailing exemptions allowed by Rule 6DD. It addresses tax implications for liabilities settled via book adjustments and presents a thorough analysis of unique cases impacted by these sections. Additionally, it outlines the required disclosures in the Tax Audit Report.

3. Incentives for Cashless Business Transactions

This chapter covers the audit of accounts for those engaged in business or profession under Section 44AB, amendments to tax audit provisions, and discussions on the new proviso concerning deemed cash for turnover. It also highlights challenges in calculating the 5% cash transaction limit, scenarios for lower income rates, and practical difficulties in implementation.

4. Restrictions on Loans, Deposits & Advances

This chapter elaborates on the provisions of Section 269SS, outlining acceptable methods for obtaining and accepting loans and deposits, including exemptions and penalties. It defines "Specified Sum," discusses transactions outside account payee cheque or bank draft methods, and clarifies penalties under Sections 271D and 271E. Disclosure requirements in the Tax Audit Report are also addressed.

5. Cash Transaction Restrictions in Real Estate

This chapter details the tax implications for sellers concerning the classification of immovable property as a capital asset versus stock in trade. It also reviews significant amendments introduced by the Finance Act 2021, discusses the role of the valuation officer, and outlines taxability provisions for buyers, including the use of Stamp Duty Value in various circumstances.

6. Disallowance of Income Tax Deductions

This chapter focuses on the provisions of Section 80D concerning health insurance premiums, Section 80GGA for donations related to scientific research or rural development, and Sections 80GGB and 80GGC regarding donations to political parties or electoral trusts. It further explains the provisions of Section 80JJAA related to deductions for employing new employees.

7. Restrictions on Cash Transactions of Rs. 2 Lacs or More

This chapter explains the provisions of Section 269ST, detailing key points, exemptions, penalties under Section 271DA, and the interplay between Sections 40A(3) and 269ST. It also specifies the disclosures required in the Tax Audit Report.

8. Provisions of Section 269SU

This chapter outlines the provisions of Section 269SU, which mandates acceptance of payments through prescribed electronic modes.

9. Tax Deducted at Source Provisions on Cash Transactions

This chapter provides insights on the provisions of Section 194N, detailing the responsibilities for deduction, available exemptions, applicable rates, and points requiring clarification from the CBDT.

10. Cash Transactions in the Agriculture Sector

This chapter discusses the applicability of Section 269ST for kachha arhatias and pucca arhatias, the provisions of Section 194N concerning agriculture produce market committees (APMC), and the implications of Section 269T for agriculturists. It also examines disallowances pertaining to cash payments exceeding Rs. 10,000 to producers in animal husbandry, livestock, and meat sectors.

11. Cash Restrictions on Charitable Trusts

This chapter explores different cash restrictions affecting donors and donees, the taxation of anonymous versus non-anonymous donations, restrictions on expenditure payments, and the use of donation collection boxes by religious and charitable trusts.

12. Reporting High-Value Cash Transactions

This chapter presents the obligations under Section 285BA for reporting financial transactions or reportable accounts.

13. Miscellaneous Issues

This chapter covers a range of miscellaneous topics, including mandatory return filing, exemptions under Section 13A for political parties, and the requirement for PAN cards for deposits and withdrawals exceeding INR 20 Lacs in a year.

Conclusion

In summary, "Know When to Say No to Cash Transactions" provides an extensive examination of various regulations impacting cash and cashless transactions.