Section 269ST of the Income Tax Act provides that no person shall receive an amount of Rs.2 lakh or more otherwise than by way of account-payee cheque / DD or by electronic clearing system through a bank account (including credit card, debit card, NEFT / RTGS, etc).

This provision would be applicable whether the recipient is a seller of goods / service provider or seller of capital goods or any other person.
This provision is applicable to all, not just businesses.

The ceiling of Rs.2 lakh would be calculated as follows.

1. Amount received from the same person in the same day (even if the purpose is different or bills are different).
2. Amount received in respect of a single transactions (even if it spread across many days).
Eg. Receipts in cash more than 2 lakh in different days, but pertaining to the same invoice.
3. Amount received in respect of a transaction relating to one event / occasion from the same person.
Eg. Transactions relating to a marriage / event – multiple invoices raised for different activities associated with the marriage (decoration, catering, engagement, reception, etc) by the same person

The penalty for violation of the above would be the amount equivalent to the amount of receipt.

On the other hand, as it was before, there is a restriction on cash payments that can be made on the same day.

Section 40A(3) of the Income Tax Act has been amended w.e.f 1st April, 2017.
The maximum amount that can be paid on a single day would now be Rs.10,000/- and NOT Rs.20,000/-

However, there is no change in the monetary limit pertaining to cash payment of Rs.35,000/- to transport contractors.

Consequently, any expenditure in respect of which payment (or aggregate of payments made to a person in a day) otherwise than by an account payee cheque / DD / electronic clearing system through a bank account, exceeds Rs.10,000/-, no deduction shall be allowed in respect of such payment.

CA Dungar Chand U Jain
PSDY & Associates
Madurai