Following up on its intention to rid the country of black money, the government announced stiff penalties for anyone receiving cash in excess of Rs.3 lakh. In a briefing held recently, Hasmukh Adhia, the Revenue Secretary stated that a 100% fine will be imposed on anyone who accepts cash exceeding Rs.3 lakh in a single transaction on any given day. This essentially means that the individual receiving the money will have to pay double that amount as tax, with Finance Minister Arun Jaitley keen to introduce Section 269 ST into the Income Tax Act in this effect.
The move comes on the heels of a proposal made by the panel of Chief Ministers, who had suggested a tax on cash payments exceeding Rs.50,000. The Finance Minister, in his budget statement had proposed a ban on all cash transactions exceeding Rs.3 lakh, with this move taking the government’s ambition towards a cashless economy one step closer.
Under the proposed penalty system, it is the receiver who will have to have to pay the penalty, forcing shopkeepers and agents to stop accepting payments which could be in the form of illegally acquired wealth. There will be certain exceptions though, with payments made towards the government, banking companies, cooperative banks or post office savings accounts not attracting the fine.
While the move has given rise to an environment where black money transactions could be reduced, individuals are finding a way around it, splitting up a sale into multiple bills, thereby ensuring that no single cash transaction exceeds Rs.3 lakhs. With the country coming to normalcy post the note ban in November last year, it remains to be seen whether this new policy can meet the desired effect.