The Income Tax Bill 2025 introduces significant changes to cash transaction limits in India. This video provides a comprehensive overview of the new rules, covering:

• Restrictions on cash receipts (₹2 lakh limit)
• Limits on cash expenses for businesses (₹10,000/₹35,000)
• Rules for accepting and repaying loans in cash (₹20,000 limit)  
• TDS on cash withdrawals (₹1 crore/₹3 crore)
• Regulations for cash donations
• Impact on depreciation of assets purchased in cash
• And much more!

New Cash Transaction Limits Under the Income Tax Act 2025 : The Income Tax Bill 2025 introduces various restrictions on cash transactions to promote digital payments and curb tax evasion. The relevant provisions are covered under Clause 36, Clause 186, Clause 185, and Clause 188.

1. Restrictions on Receiving Cash (Clause 186)

Here’s a table summarizing the penalties for violating section 186 of the Income-tax Bill 2025, as well as other key aspects of the clause:

• Penalty for violation: An amount equal to the sum received in cash may be levied as a penalty under Clause 446.
• “specified sum” means any sum of money receivable, whether as  advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place;

2. Restrictions on Acceptance of Cash Loan / Mode of taking or accepting
certain loans, deposits and specified sum.

Here is a breakdown of cash transaction limits according to Clause 185 of the Income Tax Bill 2025, in tabular form:

Meaning : “specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place; Clause 189(c)

Penalty : If a person takes or accepts any loan or deposit or specified sum in  contravention of the provisions of section 185, the Assessing Officer may impose on him, a penalty equal to the amount of the loan or deposit or specified sum so
taken or accepted. (clause 450)

In summary, according to Clause 185(1) read with clause 185(1)(iii) of the Income Tax Bill 2025, any person cannot accept a loan, deposit, or specified sum of ₹20,000 or more in cash. The transaction needs to happen through account payee cheque, account payee bank draft, electronic clearing system, or other prescribed electronic means [185(1), 185(1)(iii)].

3. Restrictions on Cash Payments for Business Expenses (Clause 36)

Here’s a summary in tabular form of the treatment of business expenses exceeding ₹10,000 (or ₹35,000 for specific cases) paid in cash, according to the Income-tax Bill 2025 and our conversation history:

• Note : If a business incurs an expense exceeding ₹10,000 in cash per day, the expense will be disallowed from deductions while calculating taxable income.

3.Repayment of  certain loans or deposits.

Clause 188 of the Income-tax Bill 2025, along with the penalty for its violation

Note : “specified advance” means any sum of money in the nature of advance, by whatever name called, in relation to transfer of an immovable property, whether or not the transfer takes place.

4. Cash Withdrawal Limits & TDS (Clause 393 Table)

4.Depreciation not Allowed if Asset over Rs 10000 Purchased in Cash

Exclusion from actual cost:  The payment or aggregate of payments exceeding ten thousand rupees in
a day for acquisition of an asset, made to a person in a mode otherwise than by specified banking or online mode, shall be excluded from the actual cost of the asset.  (clause 39)

“Specified Banking or Online Mode” shall mean transaction by  an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode, as prescribed; [ Clause 66(36)]

5. Other New Cash Transaction Limits Under the Income Tax Act 2025

Note

• The donation must be made as a sum of money.
• The term “charitable purpose” does not include any purpose that is wholly or substantially of a religious nature.
• To claim the deduction, the assessee’s return of income filed for any tax year must include information about the donation furnished by the institution or fund to the prescribed authority. This claim is subject to verification as per the risk management strategy formulated by the Board.

Key Takeaways for New Cash Transaction Limits Under the Income Tax Act 2025

1. Cash receipts of ₹2 lakh or more in a single transaction are prohibited.
2. Cash expenses exceeding ₹10,000 per day per person will be disallowed.
3. Loan repayments of ₹20,000 or more in cash are not allowed.
4. TDS at 2% is applicable on cash withdrawals exceeding ₹1 crore (₹3 crore for co-op societies).
5. Donations exceeding ₹2,000 must be made through digital modes.

Refer following for New Cash Transaction Limits Under the Income Tax Act 2025

• Key FAQs on the Income Tax Bill 2025
• New Income Tax Act 2025: update : Tabled In parliament on 13th Feb 2025
• Income-tax Bill, 2025 ​[!New]

In one of the historical reforms of the economy of India, Rs 500 and Rs 1,000 notes were banned effective from Tuesday midnight i.e on midnight of 08.11.2016. Lets study demonetization impact on Audit Report .

Demonetization impact on Audit Report : Notifications of Ministry of Company Affairs

Demonetization -Companies to Disclose in Balance Sheet ; MCA Notification

Demonetization ; Auditor to Make Disclosure in CARO Report

Demonetization impact on Audit Report : Notifications of Govt of India

Before Audit , Auditor needs to have read all the notifications issued by Govt of India  on Demonetization so as to familiarize which transactions were allowed with Rs 500/ Rs 1000 Bank Notes and upto which period.Following is the compilation of Govt of India relevant Notifications.

Demonetization Act 2017 ; Notified -Specified Bank Notes (Cessation of Liabilties) Act 2017

Demonetization impact on Audit Report : Notifications of RBI

Auditor needs to have read all the notifications , Circulars issued by RBI , Following are the key Circulars and Notifications

Read FAQs on Withdrawal of Legal Tender Status of the old Bank Notes in the denominations of Rs 500/- and ₹ 1000/- (Updated as on December 22, 2016)

Read : Also All You wanted to know from RBI about Withdrawal of Legal Tender Status of Rs 500 and Rs 1000 Notes

Demonetization impact on Audit Report -Transactions done with old Rs 500 and Rs 1000 Bank Notes

Since old Rs 500 and Rs 1000 Bank notes were allowed to be used till 15.12.2016 for certain transactions amended by Govt from time to time. Auditors needs to check as to how much amount of old currency was used to pay these transactions and sources of those payment. Read Permitted payments with only old Rs 500 till 15.12.2016 + New additions

Demonetization impact on Audit Report : Uniformity

Auditors needs to check that there is uniformity in the transactions done by the Assessee during FY 2016-17 in each and every ledger. It should not happen that Salary is paid in Advance on or before 08.11.2016 and thereafter there is no salary payment to the employees  at all.

Demonetization impact on Audit Report -Cash in Hand

Auditor needs to check the cash in Hand of the Assessee on 08.11.2016 and ensure that all the Cash in Hand in old Currency (of Rs 500 and Rs 1000)  is deposited in the bank account.

Auditor needs to check the Cash in Hand in the hands of the Assessee on 31.12.2016. All the cash in Hand needs to be in New Currency / Currency which is a valid legal tender.

Auditor needs pay special attention to the cash Book of the Assessee during FY 2016-17 . Especially on or before 08.11.2016 and after 09.11.2016 .

 Demonetization impact on Audit Report -Sales

Auditor needs to check that all the sales made on or after 09.11.2016 is in new currency or valid legal tender.

 Demonetization impact on Audit Report – Sundry Creditor:

Auditor needs to be very careful as to how the sundry creditors of the Assessee were paid / cleared on or after 08.11.2016 . Since Old note of Rs 500 and Rs 1000 were not legal tender on or after 09.11.2016 therefore he needs to take confirmations from creditors regarding their closing balance on 31.03.2017 and should check how the transactions for Financial year 2016-17 were cleared between Assessee and Sundry Creditors from the ledgers account obtained from third party

 Demonetization impact on Audit Report – Sundry Debtors:

Since Old note of Rs 500 and Rs 1000 were not legal tender on or after 09.11.2016 therefore he needs to take confirmations from Sundry Debtors regarding their closing balance on 31.03.2017. He also needs to check that all the payments on or after 09.11.2016 were received in New currency or valid legal tender. Since RBI has mandated banks to mention on Deposit Slips separately the amount of deposit in Bank account were made in New currency.

Demonetization impact on Audit Report – Unsecured Loan :

Auditor needs to be very careful as to how payment of unsecured Loan has been cleared after Demonetization decision of Govt of India.

Demonetization impact on Audit Report – Fraud reporting

If any fraud transactions in the books of company / Assessee needs to be reported in the Audit report / CARO audit report

Demonetization impact on Audit Report – Payment of Tax / Penalty

Since the Old notes of Rs 500 and Rs 1000 Could be used for payment of govt taxes and penalty, Auditor needs to ensure how much old currency notes of Rs 500 and Rs 1000 were used to pay tax and penalty.

Instructions No 03/2017

Dated 21.02.2017

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