Beware! Handle transaction above Rs 20000 with care.

Beware! Handle transaction above Rs 20000 with care.

The Income tax Act prohibits CASH transaction above Rs 20000 in two cases :

1. While making business expenditure above Rs 20,000 in CASH

2. While receiving or repaying loan/deposit above Rs 20000 in CASH

The first restriction is as per provision contained in Section 40A(3) which says that except in specific exception provided in IT Rules , no body can do business expenditure above RS 20000 by mode other than crossed cheque or Draft . Thus cash payment of business expenditure is total no-no unless case falls in certain exceptions provided in I T Rule. If you contravene this rule, then 20% of the expense done in cash shall be disallowed under Section 40A(3) of the I T Act.