Cash related

This query is : Resolved

PARTH DOSHI (Querist)
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03 July 2012 Mr. x (individual) can give "CASH" rs. 250000 to Mr. Y (individual) for his business purpose? for safer side Mr X. prepared agreement as proof. Mr. x is filling Income tax return. weather any problem will arise due to cash given by MR. X under Income Tax Act? and is agreement valid Proof? Both assessee are not cover under 44AB (Tax audit).

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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04 July 2012 1(a) If this transaction is a loan, Section 269SS will be attracted.

Section 269SS prohibits acceptance of loan in cash in excess of Rs. 20,000.

Accordingly penalty equivalent to the amount of loan shall be levied on Mr. Y.

1(b) Further, if Mr. X is not able to substantiate the source of such loan, it will be treated as undisclosed income and tax & penalty shall be levied on such amount.

2(a) If, on the other hand, this amount is given as gift, there is no taxability in the hands of Mr. X.

However, point 1(b) will still be applicable.

2(b) In the hands of Mr. Y the gift shall be exempt if Mr. X is a relative of his.

If Mr. X is not his relative, then the amount shall be taxable.

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