Cash Payment Transaction

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A client purchased a second-hand car for Rs. 1.92 lacs using cash. The user sought clarification on whether this transaction is permissible under Indian income tax laws and if it can be recorded in accounting books. While the transaction itself is generally allowed and can be recorded, it's important to note that depreciation may not be claimable on this amount due to specific income tax provisions. Additionally, cash payments exceeding Rs. 2 lacs are prohibited under Section 269ST, though this primarily relates to the mode of transaction rather than the purchase itself.

GJ Consultancy

GJ Consultancy (Querist)
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30 January 2020 Respected Experts,
One of my clients purchased second hand car with cash payment (not in cheque, by withdrawing from ATM and cash balance in hand) of Rs. 1.92 lacs. is it allowed in income tax ? can we record this in our books ? There is some confused while i have read for this on internet. so please suggest me as clear as possible.
Thanks

Amol S Joglekar

Amol S Joglekar (Expert)
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30 January 2020 yes, you can go ahead and record the same in your books of accounts.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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30 January 2020 You might have read that
Depreciation will not be allowed per 2nd proviso to section 43(1).

GJ Consultancy

GJ Consultancy (Querist)
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30 January 2020 thanks warrier and joglekar sir. limit of 10000 is only applicable in expense ?
and i think cash payment grater than 2.00 lacs is prohibited by income tax !

Amol S Joglekar

Amol S Joglekar (Expert)
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03 February 2020 Cash payment greater than 2 lakh is section 269ST...Mode of transaction. What B Chackrapani Warrier Sir has pointed out is that the purchaser is NOT able to claim depreciation on this amount

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