Amidst the widespread effect of the demonetization which was quite fresh in the cognizance of the people, Union Budget 2017 announced a loud message which was clear that the government wants a cashless economy which is digitally equipped with a minimum cash transaction. While it appears impossible for the government to ensure a cash free economy, but the shivers of the strict stance of government over black money could be felt. Section 269ST-analysis and Key Points and whether an assessee can escape the provisions of this section are given below
Section 269ST-analysis and Key Points
The Union budget 2017 brought several measures that aim at preventing tax evasion, generation of black money and money laundering. One of the measures is laying the cap on cash transactions. It has been done by introducing section 269ST that bars persons in receipt of money in cash. Nevertheless, section 269SS of the Income Tax Act very well resembles idea but is limited to deposits and loans whereas section 269ST is wide in scope.
For achieving the mission of cashless economy, the government has proposed to introduce section 269ST in the Income Tax Act for providing that no person would accept any sum of money amounting to INR 3 lakh or more,—
(a) in total from a person within a day;
(b) with respect to a single transaction; or
(c) with respect to transactions relating to an event or occasion from a particular person, otherwise than by account payee bank draft or an account payee cheque or use of electronic clearing system through a bank account.
The following limitations would not be applicable to the government, any banking companies which deals in financial transactions, co-operative bank or post office savings bank.
However, the transactions of nature mentioned in the section 269SS of the Income Tax Act, 1961 are suggested to be left out from the purview of the said section.
There is a plan to insert a new section 271DA in the Income Tax Act for providing for the imposition of penalty on the person who is in the receipt of a sum which breaches the provisions of the suggested section 269ST of the Income Tax Act.
The penalty is anticipated to be an equal amount of the receipt that means if the accused is not able to give sufficient reasons, then would the total amount of money received would be confiscated by the government.
On the contrary, in case the person has sufficient reasons for the contravention of the said provisions, the penalty would not be imposed. It is further suggested that the penalty would be imposed by the Joint Commissioner.
It is also suggested to inevitably amend the provisions contained in section 206C for omitting the provision related to the TCS (Tax Collection at Source) at the rate of 1% of cash sale consideration of jewelry exceeding INR 5 lakh.
But the Moot Point is that would section 269ST be able to Stop Tax Evasion?
Most Likely chances are No
We need to understand the genesis of origin of Black Money. Essentially Black Money gets generated in ay economy with high rate of taxes, which India has and these rates are increasing every year. Even this year, surcharge has been introduced to people with income exceeding Rs 50 lacs. Next year, at this pace, the rate of surcharge on this slab would be increased
Some of the tricks likely to be employed by people to escape section 269ST are-
- Splitting bills in small amounts. Even a consolidated single piece of item can be sold as multiple units. Say a machine could be sold in two parts vide separate bills
- In marriage ceremony, all the gifts may not be given to bride or groom, these can be split
- Even otherwise, people would be forced to spend the amount on marriage in number 2 money, without obtaining bills. This all gifts would be used to pay in cash
- Cash can be withdrawn from multiple bank accounts
It is high time the Government realizes that the economy needs tax breaks and softer taxes to increase compliance