The government has decided to lower the cash transaction limit to Rs 2 lakh from the Rs 3 lakh proposed in the Budget last month. Any spending above that will invite a penalty equivalent to the amount of the transaction, confirmed revenue secretary Hasmukh Adhia.
The limit will be revised downwards in an official amendment to the Finance Bill, which is currently being discussed in Parliament.
“This is to introduce stricter laws to curb generation and holding of illegal cash,” said a top official in the tax department.
The budget proposal of a Rs 3 lakh limit was in keeping with the recommendation of the Special Investigation Team (SIT) on black money. The SIT had also suggested a cap on cash holding allowed per person. It had proposed that if a person needs to keep or hold cash above Rs 15 lakh, she would need permission from the area tax commissioner.
“As of now, there is no prescribed limit on cash holding but transactions above Rs 2 lakh in cash has been banned,” said the tax official.
In addition to this limit, the Income Tax Act prohibits acceptance or payment of an advance of Rs 20,000 or more in cash for purchase of immovable property. Besides, quoting of PAN has been made mandatory for any purchase of above Rs1 lakh.
“The difference between demonetisation and this is that the former is used to destroy the stock of black money while the ban will prevent the future flow of black money. If you cannot transact beyond a limit in cash, where will you use your black money?” Adhia had told HT in an earlier interview.