Do you know that the Income Tax Act restricts any person to receive an amount of two lakh rupees or more in cash? If a person receives any sum, more than two lakhs, he can be fine a sum equal to the amount of such receipt.
This restriction is applicable to the recipient and not to the payer.
So in case you are even borrowing or repaying an amount more than Rs 20,000 from a relative or friend, it has to be transferred through an account payee cheque or a bank draft, or an electronic transfer through a bank account.
The government in the last budget introduced Section 269ST. Under the section, cash transactions exceeding Rs.2 lakh are prohibited with a view to promoting the digital economy. This also provides the enforcing agencies ways to tract the money chain if used for illegal activities. This provision has been brought in to curb the use of black money on various occasions like marriage, travel etc. and for which no deduction is claimed by the payer under the tax laws. For example, a caterer cannot accept Rs 2 lakh and more in aggregate for marriage reception form one person whether on a single day or over the period.
Section 269ST prohibits any person to receive an amount of Rs.2 lakh and above in cash:
However, if a person proves that there were good and sufficient reasons for the contravention, the penalty will not be imposed.
Also, it has to be noted that there are restrictions on acceptance and repayment of the loan amount from other than banks and government-specified companies. The tax laws have provisions under which you are not allowed to accept or repay any loan beyond the initial limit of Rs 20,000. The acceptance or repayment can be made in cash as long as the balance in the loan account does not exceed the threshold of twenty thousand rupees. The restrictions in respect of loans are not applicable for transactions with the bank, government, Government Company or corporation and other entities if specified by the government.