Under the Income Tax Act in India, there are specific rules governing cash transactions to encourage digital payments and track financial activity. Based on your queries regarding cash repayments and limits, here is the breakdown:
1. Limits for Business Expenditure (Section 40A(3))
If you are an assessee (business or professional) claiming an expense as a tax deduction, you must adhere to the following:
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The Limit: Any payment or aggregate of payments made to a single person in a single day, if made in cash, must not exceed ₹10,000.
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The Consequence: If you make a cash payment (or aggregate of payments) exceeding ₹10,000 to a single person in one day, that entire amount is disallowed as a business expense. This means it cannot be deducted from your taxable income, effectively increasing your tax liability.
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Exception for Transporters: If the payment is made for hiring, leasing, or plying goods carriages (transport services), the limit is higher at ₹35,000 per day.
2. Regarding Your Specific Questions
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Repayment of Rent Advance: Since this is a payment of an expenditure (rent advance), the rule under Section 40A(3) applies. To claim it as a legitimate business expense, you should use an account payee cheque, bank draft, or electronic clearing system (like NEFT, RTGS, IMPS, or UPI). If you pay more than ₹10,000 in cash to a person in a day, that payment will be disallowed as an expense.
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Splitting Payments: You asked if paying ₹1 lakh in "₹1 lakh per day on different dates" is accepted.
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The law specifies the limit applies to the aggregate of payments made to a person in a day.
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If you make payments on different days, they are generally considered separately. However, if the payments are part of a single transaction or relate to a single event/occasion, you must also be mindful of Section 269ST.
3. Important Restriction on Receiving Cash (Section 269ST)
Separately, Section 269ST prohibits any person from receiving an amount of ₹2 lakh or more in cash:
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In aggregate from a person in a day; or
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In respect of a single transaction; or
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In respect of transactions relating to one event or occasion.
Summary:
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For claiming business expenses: Avoid cash payments exceeding ₹10,000 (or ₹35,000 for transport) per person per day.
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For receiving cash: Do not accept ₹2 lakh or more in cash from a single person in a day, for a single transaction, or for a single event, as it carries a penalty equal to 100% of the amount received.