Banking - Certicom

Say No to Cash Transactions

17 Oct 2022
jins
Banking
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Certain Types Of Cash Transactions Have Serious Consequences.

1. Taking or Accepting Certain Loans, Deposits

No person is permitted to accept Rs. 20,000 or more in cash

a) For any loan or deposit or

b) Any amount related to the transfer of any immovable property (even if the transfer does not occur).
If any cash received from a person for any such purpose is still outstanding to be repaid, then the overall limit of Rs. 20,000/- will apply to the tremendous amount plus any subsequent receipt in cash.

The exceptions to this provision include the following:-
Sums of this nature accepted from

(a) Government;

(b) Any banking company, post office savings bank, or co-operative bank;

(d) Any Government company as defined in clause (45) of section 2 of the Companies Act, 2013;

(e) Such other institution, association body, or class of institutions, associations, or bodies which the Central Government may specify by notification in the Official Gazette.

(f) From a person having an agricultural income, and the recipient also having agricultural income and neither of them is chargeable to income tax.
Consequences of violation: A penalty of an amount equal to the amount taken in cash will be levied.

2. Repayment of Certain Loans or Deposits

Any branch of a banking company or cooperative society, firm, or other person is not allowed to repay any loan or deposit in cash if

(a) The amount of the loan or deposit or specified advance* together with the interest, if any, is Rs.20,000/- or more, or
(b) The aggregate amount of loans or deposits or specified advance held by such person, either in his own name or jointly with another person on the date of such repayment together with the interest, any, is Rs.20,000/- or more.
(c) w.e.f 2019-20. TDS @ 2% to be deducted on cash withdrawals of Rs. 1 Crore in a year from a bank account for business purposes.

To any person who has made

a) The loan or deposit or
b) Paid the specified advance*

This provision does not apply to-
Repayment of any loan or deposit or specified sum* taken or accepted from –

(a) Government;
(b) Any banking company, post office savings bank, or cooperative bank;
(c) Any corporation established by a central, state, or provincial Act;
(d) Any Government company as defined in clause (45) of section 2 of the Companies Act, 2013;
(e)Such other institution, association body, or class of institutions, associations, or bodies which the Central Government may specify by notification in the Official Gazette.
(Refer Sec.269T)

*Specified advance means any sum of money in the nature of advance, by whatever name called in relation to the transfer of immovable property, whether or not the transfer takes place.
Consequences of violation: A penalty for an amount equal to the amount of such loan or deposit repaid will be levied.

3. Other Cash Transaction

No person is allowed to receive in cash an amount of Rs. 2,00,000 or more-

(a) In aggregate from a person in a day; or
(b) With respect to a single transaction; or
(c) With respect to transactions relating to one event or occasion from a person,

This provision does not apply to-

(i) Any receipt by-
(a) Government;
(b) Any banking company, post office savings bank, or cooperative bank;
(ii) Transactions of the nature referred to in section 26955;
(iii) Such other persons or class of persons or receipts, which the Central Government may specify by notification in the Official Gazette. (Refer to Section 269ST)

(d) w.e.f 2019-20, Digital payments (Mode of electronic payments) are permissible in addition to account payee cheque, account payee bank draft, or electronic clearing system through a bank account. Persons having business income and turnover/ receipt exceeding 50 crores in a financial year are mandatorily required to accept payment through prescribed electronic mode or other electronic modes only. In case of failure to do so, it would attract a penalty of Rs. 5000/- for every day during which such failure continues.
Consequences of violation of this provision: penalty us. 271DA is levied for a sum equal to the amount of such receipt.

4. Disallowance of expenses incurred in Cash

In case a person incurs any expenditure for his business or profession, in respect of which payment or aggregate of payments made in cash in a day exceeds Rs. 10,000/-, 100% of such payment will be disallowed while computing his taxable income from business/ profession.
(Refer Section 40A(3)). However, some exceptions are provided (See Rule 6DD of the Income Tax Rules).

5. Deemed Income of the Subsequent year in which payment is made

In case an allowance has been made in respect of any liability incurred by a person for any expenditure, and then during any subsequent year the person makes payment in respect thereof in cash, the payment is chargeable to income-tax as income of the subsequent year if the payment or aggregate of payments made to a person in a day exceeds Rs. 10,000/-.
In case payment is being made for plying, hiring, or leasing goods carriages, then the limit is Rs.35000/-, instead of Rs. 10000/-.

6. Disallowance in respect of Fixed Assets i.e. Capital Expenditure

In case a person incurs any expenditure for the acquisition of any asset in respect of which a payment or aggregate of payments made to a
person in cash in a day exceeds Rs. 10,000/-, such expenditure is not included for the purposes of determination of the actual cost of such asset. This means that no depreciation benefit will be available on such capital expenditure incurred in cash.

Read More: GST, IT, Companies, PF, and ESI Acts Due Dates: October 2022

7. Cash Donations

Donation made in cash to a registered trust or political party, if exceeds Rs. 2000, are not allowable as a deduction u/s 80G.

8. Premium on Health Insurance

Any payment made in cash on account of premiums on health insurance facilities is not allowable as a deduction u/s 80D of the IT Act.

Step Towards Capital Account Convertibility: Comprehensive Guide

25 Aug 2022
jins
Banking
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The Ministry of Finance notified the new FEMA Overseas Investment Rules and Regulations yesterday and made some significant changes to the framework for allowing investment outside India by Indian entities as well as resident individuals:

1. Investments by Indian Entities into a Foreign Entity:

In a first, the new rules seem to permit investments by Indian entities into a foreign entity which has invested or invests into an Indian company, popularly called ‘round trip’ structures, subject to certain safeguards on layering of subsidiaries. In the context of foreign entities, subsidiary has been defined based on control (including more than 10% voting rights). Quite a welcome move to enable Indian businesses invest into global companies which also have an India presence as also to create efficient structures for global expansion and fund raising.

2. Investments in Less Than 10% Equity:

Investment in less than 10% equity of an unlisted foreign company has been permitted under the portfolio route under select circumstances (swap, rights issue, merger etc).

3. ODI by Existing Indian Companies:

In an interesting move, ODI by existing Indian companies not engaged in financial services has been permitted into foreign companies engaged in financial services subject to profitability track record for 3 years.

4. RBI Approval For Any Fresh Investment by Companies:

The requirement of RBI approval for any fresh investment by companies in loan default or under investigation by CBI, ED etc has been replaced with the requirement of an NOC by these agencies or banks. Similar changes brought in for disinvestment. Interestingly, the definition of disinvestment has been amended to include extinguishment of rights in shares, which should cover cases involving write off of equity investment by way of a reduction of capital by the overseas invested company.

5. RBI Approval For Restructuring The Balance Sheet:

The requirement of RBI approval for restructuring the balance sheet of the overseas investee company involving write off of more than 25% of the amount invested has been done away with. If amounts invested exceed USD 10 mn, valuation report needs to be furnished.

6. Gift of Foreign Security From Non-Resident:

For resident individuals, gift of foreign security from non-resident has been permitted subject to compliance with FCRA. Further, gift from residents is permitted only if they are relatives.

7. Liquidation Of The Overseas Company is Permitted:

Transfer or liquidation of the overseas company is permitted only post one year of holding by the Indian entity – while the earlier Regulations required the overseas company to be in operation for an year and filing of one APR by the Indian entity, the Regulations have now made it clear that a one year holding period is required before any transfer of shares can be made.

Here are the Rule Changes for Cash Deposits of More Than 20 Lakh in a Year.

19 Jul 2022
jins
Banking, Income Tax, Tax Update
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Here Are The Rule Changes For Cash Deposits Of More Than 20 Lakh in a Year.

The government had modified cash limit restrictions earlier in the year in an effort to clamp down on illegal and unaccounted cash transactions. Paying or receiving cash above the stated cutoff points is punishable by up to 100 percent of the amount paid or received.

According to the new standards and guidelines established by the Central Board of Direct Taxes (CBDT), persons wishing to keep more than 20 lakh per year will now be required to present their PAN details as well as their Aadhaar card.

While there was formerly a limit of 50,000 people expected to outfit PAN subtleties while saving money, the Income Tax division has imposed no yearly line.

However, under the new rules, cash withdrawals and deposits of large sums of money across several institutions in a single year must be accompanied by PAN and Aadhaar subtleties to identify identifiable complexities.

“Each individual will, at the time of entering an exchange determined in segment (2) of the Table beneath, quote his extremely durable record number or Aadhaar number, generally, in reports relating to such exchange, and each individual determined in section (3) of the said Table, who gets such archive, will guarantee that the said number has been properly cited and validated,” the CBDT said in a May 10 notification.

Read More: 24 different investments and expenditures you can claim in 80C up to 1.5 Lakh while filing your tax returns

In recent years, the Income Tax division, along with other Central government departments, has been updating and revising guidelines to reduce the risk of monetary extortion, illicit cash exchanges, and other cash wrongdoings.

To limit the use of money in high-value transactions, the government also prohibits receiving cash worth more than 2 lakh. In this manner, an individual cannot accept more than 2 lakh in real money, even from close family members.

To combat dark money, the government has established distinct lines on cash trades. We should look into several money exchanges that could have major consequences:

In India, cash exchanges above 2 lakh rupees are prohibited under any circumstances. For example, if you buy gold jewels valued 3 lakh in a single transaction, you should pay by cheque, Mastercard, charge card, or bank transfer.
You must follow this regulation regardless of whether you get money from a relative.
To limit cash usage in high-value transactions, the government prohibits anyone from tolerating currency worth more than Rs. 2 lakh. Thus, even from direct relationships, an individual cannot accept more than 2 lakh in real money in a single day.
Even a monetary incentive of more than 2 lakh from a single benefactor on a single occasion cannot be accepted. Individuals who accept cash in excess of Rs. 2 lakh in violation of this regulation may face a fine equal to the amount received.

While charge planning, be certain that you do not pay for health insurance in actual money. Citizens who pay their insurance premiums in cash are not eligible for the Section 80D deduction. It is necessary to complete the process through the financial system.
If a person obtains a loan from a financial institution or a friend, the total amount cannot exceed 20,000. A same rule applies to obligation repayment. The repayment of a 20,000 loan should be done through a monetary channel.
The greatest extreme amount of money permissible in a property exchange is also 20,000. The cutoff remains unchanged regardless of whether a dealer acknowledges a change.
They can’t guarantee any use exceeding 10,000 if it’s paid in real money to a single individual in a single day for independently working citizens. The law establishes a greater ceiling of 35,000 for payments made to a carrier.