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Cash transactions may attract up to 100% penalty by Income Tax Department
Penalty on cash transactions: Recently in a brochure the Income Tax Department has said that taxpayers should avoid using cash for their daily transactions as in certain specified cases penalty for an amount equal to the cash can be imposed. Moreover, the income tax department will disallow deductions if cash is used for transacting above a certain limit. Know the details.
The Income Tax Department while acknowledging Indian society’s affinity with cash transactions warned that the Income Tax Act, 1961 discourages cash transactions and will disallow certain deductions, allowances, expenses, etc if made in cash. Moreover, if certain transactions above a limit are settled using cash, then the tax department will levy a penalty equal to the amount paid in cash if caught.
“Say “No” To Cash Transactions. Individuals prefer to receive, pay, and transfer cash when the amounts of transactional value (money) involved are marginal to small,” said the Income Tax Department in a brochure released on January 2, 2025.
Many people in past have paid heavy price of such transaction even when unintended. “I recollect a case where an erstwhile actress without the knowledge of limits of acceptance or repaying of cash loans resorted to a transaction which resulted in levy of penalty of equal amount of loan in her case,” says Ramakrishnan Srinivasan, former chief commissioner of income tax.
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