Suitable amendment to the Income Tax Act proposed to enforce the decision from April 1, 2017
The government on Wednesday imposed a cap on cash transactions above ₹3 lakh, taking forward the agenda to move towards a cashless economy. The decision, which comes into effect starting April 1, 2017, is based on the recommendations of Special Investigation Team (SIT) on Black money.
“The SIT set up by the government on black money has suggested that no transaction above ₹3 lakh should be permitted in cash. The government has decided to accept this proposal,” Finance Minister Arun Jaitley said while presenting the Budget 2017-18. He added that the suitable amendment to the Income-tax Act has been proposed in the Finance Bill for enforcing this decision.
The Budget documents pointed out that in India, the quantum of domestic black money is huge, which adversely affects the revenue of the government, thereby creating a resource crunch for its various welfare programmes. Further, it added that black money is generally transacted in cash and large amount of unaccounted wealth is stored and used in form of cash.
Towards a cashless economy
“In order to achieve the mission of the government to move towards a less-cash economy to reduce generation and circulation of black money, it is proposed … that no person shall receive an amount of ₹3 lakh or more, (a) in aggregate from a person in a day (b) in respect of a single transaction or (c) in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account,” it detailed.
However, the proposed restriction shall not apply to government, any banking company, post office savings bank or co-operative bank. It has been proposed that the penalty for receiving over ₹3 lakh in cash be equal to the amount of received. However, is a person proves that “there were good and sufficient reasons for such contravention,” there won’t be any penalty. With this cap, the earlier provision of collecting 1% tax at source for cash sale of jewellery over ₹5 lakh will be omitted, the documents clarified.
The Finance Minister has also proposed to limit cash donation received by a charitable trust to ₹2,000 from ₹10,000. “…no deduction shall be allowed under the section 80G in respect of donation of any sum exceeding ₹2,000 unless such sum is paid by any mode other than cash.” This amendment will take effect from April 1, 2018.
Additionally, a mission will be set up with a target of 2,500 crore digital transactions for 2017-18 through UPI, USSD, Aadhar Pay, IMPS and debit cards, Mr. Jaitley announced.
Stating that a shift to digital payments has huge benefits for the common man, Mr .Jaitley said that there is already evidence of increased digital transactions. A total of 125 lakh people have adopted the BHIM app so far. The government plans to roll out two new schemes that will further drive adoption and usage of BHIM. “These are Referral Bonus Scheme for individuals and a Cashback Scheme for merchants,” the finance minister pointed out.
Promotion of digital economy is an integral part of the Government’s strategy, Jaitley said, adding it has a transformational impact in terms of greater formalisation of the economy and mainstreaming the financial system into the budget system.
“This, in turn, is expected to energise private investment through lower cost of credit. India is now at the cusp of a massive digital revolution.” he said.