Cash transaction limit for a pvt ltd

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SANJOY SARDAR (Querist)
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10 August 2017 Hi all
It has come to know that Maximum cash transaction Per day Rs 10,000/- its ok, but fact is that Maximum Rs 5000/- i can pay if payee is not issued any bill or non-Taxable bill, is it true,,, if payee is issued taxable bill then i can pay Rs 10000/- is it true??? what should be about bank payment????
Need Your opinion.
Sanjoy Sardar
Accountant

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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18 July 2024 In India, there are regulations under the Income Tax Act that govern cash transactions to promote transparency and curb black money transactions. Here’s an overview of the current rules regarding cash transactions for private limited companies:

### Cash Transaction Limits

1. **Section 269ST:** According to Section 269ST of the Income Tax Act, 1961, a person (including a company) is prohibited from receiving an amount of Rs. 2 lakh or more in cash:
- In aggregate from a person in a day; or
- In respect of a single transaction; or
- In respect of transactions relating to one event or occasion from a person.

This means that no single cash transaction should exceed Rs. 2 lakh. This rule applies to both receiving and paying cash.

2. **Section 40A(3):** Under this section, if a payment is made to a person exceeding Rs. 10,000 in cash, then the deduction for such expenditure is disallowed unless it is made through banking channels (i.e., cheque, bank draft, electronic clearing system, etc.). However, there are exceptions to this rule, such as payments to certain specified persons (like agricultural producers, transport operators, etc.), where the limit is Rs. 35,000.

### Specific Points to Note:

- **Taxable and Non-Taxable Bills:** The distinction between taxable and non-taxable bills does not affect the cash transaction limit directly under Section 269ST or Section 40A(3). Both sections primarily regulate the amount of cash that can be transacted in a single transaction or in aggregate in a day.

- **Bank Payments:** Payments made through banking channels (cheque, bank draft, electronic transfers) are not subject to the restrictions mentioned above. There is no limit on the amount that can be paid through banking channels.

### Compliance and Best Practices:

- **Record-Keeping:** Maintain proper records of all transactions, whether in cash or through banking channels.

- **Tax Invoices:** Ensure that tax invoices or proper documentation (including bills where applicable) are obtained for all transactions to substantiate business expenses.

- **Tax Advisor Consultation:** Given the nuances and potential updates in tax laws, it’s advisable to consult with a tax advisor or chartered accountant to ensure compliance with current regulations and to understand any recent amendments or notifications.

In summary, while there are restrictions on cash transactions under the Income Tax Act, they primarily pertain to the mode of payment rather than the nature of the bill (taxable or non-taxable). Payments exceeding specified limits should generally be made through banking channels to avoid disallowance of expenses under Section 40A(3) and to comply with reporting requirements under Section 269ST.