Ban on cash transactions in excess of Rs 2 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 Rs 2 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 Income Tax Act, the Central Board of Direct Taxes (CBDT) said the restriction will 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 would be issued in this regard.
In the 2017-18 Budget, Finance Minister Arun Jaitley had proposed to ban cash transaction of over Rs. 3 lakh. This limit was lowered to Rs. 2 lakh as an amendment to the Finance Bill, which was passed by the Lok Sabha last month.
The restriction is also not applicable to any receipt by government, banking company, post office savings bank or co-operative bank, said CBDT, the apex the policy-making body of the Income Tax Department.
The move to ban cash transactions 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 Rs. 2 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 Rs. 10,000 will not be eligible for claiming depreciation allowance or investment-linked deduction.
Similarly, the limit on revenue expenditure in cash has been reduced from Rs. 20,000 to Rs. 10,000.
In order to promote digital payments in case of small unorganised businesses, the rate of presumptive taxation has been reduced from eight per cent to six per cent for the amount of turnover realised through cheque/digital mode.