The new amendment under the latest finance bill supports for lowering of cash transaction limit from the earlier announced amount of Rs.3 lakhs to Rs. 2 lakhs in order to curb the use of black money and cash hoarding. However, during the last month in the wake of Budget 2017 important announcements, the rumours indicated that a limit of Rs. 3 Lacs will be announced during the Budget 2017 reading in context of cash transactions.
But, of late, Mr. Hasmukh Adhia (Financial Services Secretary) has made an announcement to the media stating about the said development under the latest Finance Bill amendment. He also informed that a penalty equivalent to the transacting amount will be recovered from the defaulter if he/she spends anything in cash more than the prescribed limit.
However, there is a large possibility of revision of the said cash transacting limit regarding which the discussions are currently going on in the parliament. If there comes any change, it will be done as an official amendment in the finance bill. According to a IT department top official – “This measure has been taken as an initiative towards introducing stricter laws in order to put a full stop on black money hoarding.”
Earlier, the proposal for Budget 2017 in context of setting limits on cash transactions was Rs. 3 lacs which came as a recommendation from the SIT (Special Investigation Team) in regard to black money and demonetisation. The SIT had also suggested for a cap on cash holding allowed per person. It suggested that if a person is seeking to hold a cash amount of Rs. 15 lakhs or above, he/she is needed to get a permission from the area tax commissioner. Besides, this measure had been taken by the SIT in the wake of excessive black money recoveries been made by the IT department from all parts of the country.
As of now, no prescribed limit for cash holding has been defined by the government but cash transactions above Rs. 2 lakhs have already been banned. Added to that, the IT Act prohibits acceptance or payment of Rs. 20,000 or more in cash as advance amount for purchase of immovable property. Further, quoting of PAN number has been made a compulsion for any purchase of more than Rs. 1 lakh. Moreover, Government want to make it very clear to the general public that you need to transact using your debit/card cards while you make a payment of a large sum of money so that it could come in records.
According to Mr. Adhia - what demonetisation has done is that it has destroyed the stock of black money while the recent ban on cash transactions above Rs. 2 lakhs are going to prevent the future flow of illegal money in the economy. He further added by saying that – “if there will be a cash transaction limit in place, no one will be able to spend their black money as black money transactions always happens in cash.”
The move is considered to be a revolutionary one as it is expected to completely eliminate the flow of black money in the market and which will also help to keep a check on big national issues like terrorism and smuggling of weapons and drugs. As a matter of fact, these life-threating and evil institutions only survive on the availability of black money, which is nothing but the unrecorsded cash transactions. By setting a cash transaction limit, government is sending a very clear message to every one of those involved in generating or supplying illegal money.