PAN and Aadhaar are required for cash deposits above Rs 20 lakh per year
To crack down on illegal and unaccounted cash transactions, the government had amended the cash limit rules at the beginning of the year. Heavy fine up to 100 per cent of the amount paid or received may be imposed for making or receiving cash payments in excess of the prescribed limit.
Under the new rules and regulations set by the Central Board of Direct Taxes (CBDT), individuals who wish to deposit more than Rs 20 lakh annually will now have to mandatorily submit their PAN details and their Aadhaar card.
While earlier there was a limit of Rs 50,000 per day for individuals to furnish PAN details while depositing cash, the Income Tax Department did not set any annual limit.
But under the new rules, large amounts of cash withdrawals and deposits in a year at one or more banks need to be followed along with PAN and Aadhaar details to make them trackable details.
“Every person, while entering into the transaction specified in column (2) of the table below, shall quote his Permanent Account Number or Aadhaar Number, as the case may be, and every person specified in the documents relating to such transaction. In column (3) of the said table, whoever receives such documents shall ensure that the said number is duly quoted and certified,” the CBDT said in its notice dated May 10.
Individuals who do not have a PAN are required to apply for PAN at least seven days prior to entering into any transaction exceeding Rs 50,000 or more than Rs 20 lakh in a financial year.
The Income Tax Department, along with other departments of the central government, has been updating and revising rules over the years to reduce the risk of financial fraud, illegal money transactions and other money offences.
The government also prohibits receiving cash above Rs 2 lakh to restrict the use of cash in high value transactions. Therefore, a person cannot accept cash more than Rs 2 lakh, not even from close family.
The government has put several limits on cash transactions to tackle black money. Let’s take a look at some cash transactions that can have dire consequences:
- The Income Tax laws of India prohibit cash transactions above Rs 2 lakh for any reason. For example, if you buy gold jewelery worth Rs 3 lakh in a single transaction, you will have to pay through cheque, credit card, debit card or bank transfer.
- You should follow this guideline even if you receive money from a family member.
- The government prohibits anyone from accepting cash above Rs 2 lakh in order to limit cash usage in high value transactions. Therefore, a person cannot accept more than Rs 2 lakh in cash in a day, not even from close relatives.
- A cash gift of more than two lakh rupees also cannot be accepted from a single donor at a time. Those who accept cash in excess of Rs 2 lakh in contravention of this section may face a penalty equal to the amount received.
- Make sure you don’t pay cash for health insurance during tax planning. If taxpayers pay their insurance premiums in cash, they are not eligible for section 80D deduction. This needs to be done through the banking system.
- If a person takes a cash loan from a financial institution or friend, the total amount cannot exceed Rs 20,000. The same rule applies to loan repayment. Repayment of Rs 20,000 loan should be done through a financial channel.
- In a property transaction, the maximum cash allowed is also Rs 20,000. The limit remains the same even if a seller accepts the advance.
- When it comes to self-employed taxpayers, they cannot claim any expense exceeding Rs 10,000 if it is paid in cash to an individual on a single day. The law establishes a higher limit of Rs 35,000 for payment made to a transporter.