Summary of the Sections restricting cash payment under the Income Tax Act, 1961

Arvind Tuli | Last updated: 08 December 2020

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This article provides a concise overview of sections within the Income Tax Act, 1961, that restrict cash payments. It outlines various sections, their specific limits, and the modes of payment that are disallowed, primarily focusing on transactions exceeding certain thresholds made otherwise than by account payee cheque, draft, or ECS. The aim is to briefly list these restrictions, with detailed explanations of each section to follow in subsequent articles.

A brief Summary of the Sections restricting cash payment under the Income Tax Act, 1961.

In this article, I am only listing the sections and the limits for an overall brief summary. In a series of article I will be discussing each of these sections in detail.

Income Tax Act: Cash Payment Restrictions Explained

		Disallowance	Limit	Mode	Exceptions
Heads of Income
1.	Sec 35AD	disallow capital expenditure in respect of which payment or aggregate payment	> 10,000 per person per day	Otherwise than by Account payee Cheque/Draft and ECS or such other electronic mode as may be prescribed [Finance Act 2019]	None
2.	Sec 40A(3)/(3A)	Any payment for any expenditure – revenue or Capital : allowed as a deduction u/s 30 to 37	> 10,000 per person per day per bill >35,000 for transporter payments	Otherwise than by Account payee Cheque/Draft and ECS or such other electronic mode as may be prescribed [Finance Act 2019]	Rule 6DD
3.	Sec 43(1)	Actual cost of a DCA: where payment is made for the purchase of a Capital Asset	> 10,000 per person per day	Otherwise than by Account payee Cheque/Draft and ECS or such other electronic mode as may be prescribed [Finance Act 2019]	None
4.	43CA 50C & 56(2)(x)	Where the date of agreement fixing the value of consideration for the transfer of the asset and the date of registration of such transfer of asset are different,	then the full value of consideration for transfer of such asset shall be the stamp duty value on the date of the agreement provided the amount of consideration or a part thereof has been received by	Account payee Cheque/Draft and ECS or such other electronic mode as may be prescribed [Finance Act 2019]	None
5.	Sec 44AD	%age of the total turnover or gross receipts received · during the previous year or · before due date of filing of return under section 139 (1)	6% of such receipts will be deemed income. & for other modes of receipts(including money not received) it will be 8%	Otherwise than by Account payee Cheque/Draft and ECS or such other electronic mode as may be prescribed [Finance Act 2019]	None
DEDUCTIONS FROM GTI
7.	Sec 80G	Donations to certain approved institutions	> 2,000	Otherwise than by cash	None
8.	Sec 80GGA	Donations to Research Institutions by a person not doing business or profession	> 10,000	Otherwise than by cash	None
9.	Sec 80 GGB/GGC	Donation to political party and Electoral trust	> 0	Otherwise than by cash	None
10.	Sec 80JJAA	Additional 30% deduction for additional employee cost	To claim the deduction the payment of salary to the employee must be paid	Otherwise than by Account payee Cheque/Draft and ECS or such other electronic mode as may be prescribed [Finance Act 2019]
11.	Sec 13A	Section 13A of the Act requires a political party to receive donation	> 2,000	Otherwise than by Account payee Cheque/Draft and ECS or such other electronic mode as may be prescribed [Finance Act 2019]
Loans & other receipts
6.	Sec 269ST	No person shall receive an amount of · Receipts in Kind not covered · This section applies to the receiver · Sec 271DA an amount equal to the receipt is penalty	≥ 200,000 Per person/per day · in respect of a single transaction; or · in respect of transactions relating to one event or occasion from a person,	Otherwise than by Account payee Cheque/Draft and ECS or w.e.f 01/09/19 such other electronic mode as may be prescribed [Finance Act 2019]	Received BY the following not covered Govt./Banks/Post Office 6DD not applicable Does not apply to loans/Deposits for the Sec 269SS & 269T are applicable
	Sec 269SU w.e.f 01/11/2019	Mode of acceptance of business payments : The Section is applicable to businessnot profession Sec 271DB: Penalty of 5000 per day No transaction charges on this by the banks	· Where the turnover > 50 crore · Applicable to every person	All payments to be collected through electronic modes prescribed
12.	269SS	Acceptance of loans or advances of specified sum	> 20,000	Otherwise than by Account payee Cheque/Draft and ECS or w.e.f 01/09/19 such other electronic mode as may be prescribed [Finance Act 2019]
13.	269T	Repayment of loans or advances of specified sum	> 20,000	Otherwise than by Account payee Cheque/Draft and ECS or w.e.f 01/09/19 such other electronic mode as may be prescribed [Finance Act 2019]