Restriction on cash transactions

• In order to achieve the mission of the Government to move towards a less cash economy and to reduce generation & circulation of black money, it is proposed to insert section 269ST in the Act to provide that no person shall receive an amount of Rs.3 lakhs or more-

(a) in aggregate from a person in a day; or

(b) in respect of a single transaction; or

(c) in respect of transactions relating to one event or occasion from a person,

otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account.

• It is further provided that the said restriction shall not apply to (i) Government, (ii) any banking company, (iii) post office savings bank or co-operative bank, (iv) any receipt from sale of agricultural produce by an individual or HUF in whose hands such receipts constitutes agricultural income (v) such other persons or class of persons or receipts, as may be specified by the CG by notification in the Official Gazette and (vi) in respect of transactions of the nature referred to in section 269SS.

• It is also proposed to insert new section 271DA in the Act to provide that if person receives any sum in contravention of the provisions of section 269ST, he shall be liable to pay the penalty of a sum equal to the amount of such receipt. The penalty shall not be imposable if such person proves that there were good and sufficient reasons for the contravention.

• It is also proposed to consequentially amend the provisions of section 206C to omit the provision relating to tax collection at source at the rate of 1% of sale consideration on cash sale of jewellery exceeding Rs.5 lakhs. However, inspite of this amendment, the provision of section 206C would apply on cash sale of jewellery exceeding Rs.2 lacs as it would be otherwise covered by the term ‘any other goods’.

• These amendments will take effect from 01.04.2017.

Dear Sir

Does this new section, restricts the cash withdrawal of Rs. 3 lacs or more from a bank account in a day? Please advise.

As withdrawal does not constitute Receipt, the restriction on withdrawal do not apply now, unless specifically notified otherwise.

Withdrawals

Definition: A withdrawal occurs when funds are removed from an account. Withdrawals can be triggered for many types of accounts, including bank accounts and pension accounts. A withdrawal may not be allowed unless certain conditions are met, such as the passage of time. For example, funds cannot be withdrawn from a certificate of deposit until one year has passed, or a person cannot withdraw funds from a pension account until he reaches retirement age. If these requirements are not met but a withdrawal is still made, this can result in penalties, which offset the amount paid out, resulting in a smaller net payment.

From the perspective of the entity managing an account, a withdrawal can require that investment instruments be liquidated before cash can be paid to the owner of the account. This can present an investment planning issue for the institution, which cannot invest funds in longer-term investment instruments if there is an expectation that withdrawals will occur in the near future. This issue is the reason for withdrawal penalties, which are intended to prevent account holders from withdrawing funds until the associated investments have been liquidated.

In rare cases, an in kind withdrawal is made, which means that the account holder accepts as payment the type of asset in which the account funds are currently invested.

A withdrawal can also refer to the draw down of an owner's account in a sole proprietorship or partnership. In this situation, the funds are intended for personal use. The withdrawal is not an expense for the business, but rather a reduction of equity.

Receipt:

Definition: A receipt is a written document triggered by the receipt of something of value from a third party. This document acknowledges that the item has been received, and may contain the following information:

• The date of the transfer
• A descripttion of the item received
• The amount paid for the item
• Any sales tax charged as part of the transfer
• The form of payment used (such as with cash or a credit card)

Receipts are usually associated with the delivery of goods or services from a supplier. They can be used for several reasons, including the following:

• To document the transfer of ownership to the buyer
• As a control, so that the buyer has proof of the amount paid
• To form the basis for an accounting entry to record the underlying transaction
• To document ownership for insurance purposes
• As proof of delivery from the supplier, in case goods are returned under warranty
• To provide evidence that a sales tax was paid as part of the transaction, so that the buyer is not liable to pay a use tax

Thank you Sir. Are these defined in the Income Tax Act? I heard in the recent Budget Seminar by Dr. Girish Ahuja ji, that cash withdrawal of Rs. 3 lacs or more from a bank account in a day, will not be allowed from April 1, 2017 as per new sec 269ST. May be I overheard or didn't get it right.

I respect the interpretation of Dr. Girish Ahuja ji. Also as per fine prints of the amended section, word withdrawal may have been inserted. It is little early to get any such clarification. Let us watch any such notification from RBI, because banks work as per RBI directives.

In this connection I would like to bring to attention one more point, that Bank deposits constitute property of the depositor. Under Article 300A of the Constitution, the right to property is a Constitutional right, which cannot be deprived save by the authority of law; this right cannot be deprived by administrative instructions.

"Today, the right to property under Article 300A [not a fundamental right after Constitution (44th Amendment) Act, 1978 w.e.f 20th June, 1979], by metamorphosis of judicial verdicts, has ascended to the position of a human right, which also flows from Article 21. Thus, the jurisprudence of the right to property is now inching towards inter-linking article 300A with the golden troika – Articles 14, 19, and 21 of the Constitution. This is a welcome development to keep the executive within constitutional bounds."  Shri Bishwajit Bhattacharyya, a senior advocate, Supreme Court, and ex-additional solicitor general of India

Refer:1. https://qz.com/850094/demonetisation-a-constitutional-law-expert-explains-why-the-narendra-modi-government-cant-stop-indians-from-accessing-their-money/

2. https://scroll.in/article/821484/is-the-modi-governments-restriction-on-bank-withdrawals-supported-by-law

Dear Sir,

we are starting a new diary farm and we have to purchase some cows on cash purchase from farmers and villagers and we have to pay cash to them, is the cash transaction restriction applies to the this cow purchase , please clarify.

Thanks in Advance