From April 1, people will have to pay 100 per cent penalty on transactions over Rs 3 lakh. Central government is reportedly imposing this to discourage withdrawal of large sums.
Revenue Secretary Hasmukh Adhia said in an interview on Sunday: “Supposing you do a transaction of Rs 4 lakh in cash, then the penalty would be Rs 4 lakh. If you do a transaction of Rs 50 lakh, penalty would be Rs 50 lakh”.
The one who receives the money will pay the penalty. “If someone buys an expensive watch for cash, it is the shopkeeper who will have to pay the tax,” he said.
The measure is an extension of the November 8 decision to banold notes of Rs 500 and Rs 1000. It is part of the central government’s proposed ban on cash transactions of over Rs 3 lakh that was mooted in Budget 2017-18. The objective is to stop “future generations” of unaccounted money from flowing into the financial system.
This means that central government will monitor huge cash transactions and “avenues of conspicuous consumption through cash.” So if you spend unaccounted money on holidays or luxury items such watches,cars, and jewellery then it will all be tracked now.
Previously it was made mandatory to show PAN cards for withdrawal of over Rs 2 lakh.
Finance Minister Arun Jaitley had proposed to insert Section 269ST in the Income-Tax Act to state that under this budget session “no person shall receive an amount of Rs 3 lakh or more by way of cash in aggregate from a person in a day; in respect of a single transaction; or in respect of transactions relating to one event or occasion from a person”.
The restrictions will not apply to the central government, post office savings, banking institutions, or co-operative bank.
Days before Jaitley tabled his Budget, a panel of Chief Ministers headed by Andhra Pradesh Chief Minister Chandrababu Naidu recommended limits on cash transactions and tax on cash payments of over Rs 50,000.