Aiming to curb the generation of black money, the government is considering 100% penalty on cash transactions above Rs 3 lakh. The possibility of such a penalty was discussed by Revenue Secretary Hasmukh Adhia. If approved, this new rule will become effective from April 1, 2017.
Such a penalty would apply to the receiver of the money. For example, is someone purchases goods worth Rs 4 lakh in cash from a shopkeeper, then the shopkeeper will have to pay the penalty and not the buyer. So, it will become the receiver’s responsibility to not accept cash above Rs 3 lakh. A 100% penalty would mean the same amount that someone may have received in cash above Rs 3 lakh. For example, if someone accepts Rs 4 lakh cash, then they will have to pay Rs 4 lakh as penalty. If its Rs 25 lakh, they will have to pay a penalty of Rs 25 lakh.
Pointing out to the reasons for such a steep penalty, Adhia said that people with black money use their unaccounted cash for buying stuff like travel packages, luxury goods, jewelry, etc. He said that the 100% penalty would act as a deterrent for those accepting black money.
It may be recalled that earlier during Union Budget 2017, Finance Minister Arun Jaitley had proposed to insert Section 269ST in the Income-Tax Act to state that “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”.
Adhia also said that this penalty will not be applicable in case of banks, government, post office savings bank and co-operative banks.