New rule about trading 2 lakh

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CA Vicky Sharma (Querist)

16 June 2016 rk is a wholesaler proprietor firm which is trading in sugar,fur,oil etc. what is new rule that one ledger is not cross 2 lakh above turnover and payment via cheque. plz tell detailed

Rupesh Jain

Rupesh Jain (Expert)

16 June 2016 its Regarding the TCS applicable when single bill buy in cash more than Rs. 2 lacs . not consider the single ledger or transaction of one year.

CA Vicky Sharma

CA Vicky Sharma (Querist)

16 June 2016 Actually I want to know that if party will make payment after 5-6 days then is that mandatory to provide their pan no and make payment via cheque

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

04 August 2024 The rule you are referring to relates to tax compliance requirements under the Income Tax Act for cash transactions. Here’s a detailed breakdown of the relevant provisions:

### **1. Limit on Cash Transactions**

Under Section 269ST of the Income Tax Act, 1961, introduced via the Finance Act, 2017, there are specific provisions regarding cash transactions to prevent tax evasion. These rules are relevant to businesses and individuals:

- **Cash Transactions Limit:** As per Section 269ST, no person can receive more than ₹2 lakh in cash from a single person in a single day, for a single transaction, or in respect of a single transaction relating to the same entity.

- **Application to Businesses:** This rule applies to businesses as well. For example, if a wholesaler (like RK) conducts transactions, they cannot receive more than ₹2 lakh in cash from a single buyer for a single transaction or a series of related transactions.

### **2. Payment via Cheque**

To comply with the rules:

- **Payments Above ₹2 Lakh:** Payments exceeding ₹2 lakh should be made via bank channels, such as cheque, demand draft, or electronic transfers. This rule ensures that large transactions are documented and traceable.

- **PAN Requirement:** When the payment is made via cheque or other bank instruments, it's advisable to obtain the PAN (Permanent Account Number) of the party making the payment to ensure proper documentation and compliance with the provisions.

### **3. Impact of Delay in Payment**

- **Payment Timing:** If a payment is made after 5-6 days and the amount exceeds ₹2 lakh, it should still be done via a cheque or electronic transfer. The key point is that the transaction should not exceed ₹2 lakh in cash. Delays in payment do not change the requirement to adhere to the cash limit.

### **Summary of Requirements:**

1. **Cash Limit:** Ensure no single cash transaction exceeds ₹2 lakh.
2. **Cheque/Bank Transfer:** Payments above ₹2 lakh should be made through bank channels (cheques, drafts, or electronic transfers).
3. **PAN Collection:** Obtain and record the PAN of the party making the payment to maintain compliance and for audit purposes.

### **Additional Points:**

- **Documentation:** Maintain proper records of transactions exceeding ₹2 lakh and ensure they are conducted through bank accounts.
- **Compliance:** Regularly review and update compliance practices to align with the latest provisions under the Income Tax Act.

By adhering to these guidelines, you can ensure compliance with the provisions related to cash transactions and maintain proper financial documentation for your business activities.

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