Question about 1% tax on cash purchase over 2 lakh

Hello Sir, My father run a small retail shop where he purchase goods from local wholesalers to whom he pay regular installments of 5-10K per week in cash and get receipt of payment. Our accountant is saying , since we do cash payment of more than 2 lakhs in 1 year, we will have to pay 1% tax from now. Whereas my understanding is, the tax applies only if we do purchase in single time. Can you please confirm about this as the maximum amount of bill we have is of 20-25 K. Thank You
Replies (3)

Yes you are correct, no need to pay 1% tax; but better to pay through cheque whenever possible.

Hope you are referring to TCS. As I understand, TCS is applicable transaction-wise (i.e. based on the invoice value and cash received). If both are <=2 lacs per transaction, then no TCS is applicable. Refer link for more details (Q19 in particular): https://goo.gl/vGOazV

Hello Dhirajlal and Purnima, Thanks a lot for your replies and your suggestion. Even I used to think the same . It is strange why the accountant we used think differently Thank you

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