Buying Property? Use No Cash At All
Hoarders of cash had a rough time after the news of note ban came as a bolt from the blue on November 8 last year. Much inconvenience was also caused to those who had to exchange the old notes of high denominations as these were rendered illegal by Prime Minister Narendra Modi in a surprise television address on that day. After demonetisation, further steps are taken to ensure the use of paper currency in the economy, is kept to the minimum. New measures are being implemented that would bring more and more transactions online.
For instance, the government has banned cash transactions involving Rs 2 lakh and over starting April 1 this year through the Finance Act, 2017. A new Section ─ 269ST ─ was inserted in in the Income Tax Act, banning cash dealings of Rs 2 lakh and more on a single day, towards a single transaction or transactions relating to one event or occasion by a person. Earlier, Finance Minister Arun Jaitley while presenting the Budget for 2017-18 had kept this limit at Rs 3 lakh which was further lowered by an amendment in the Finance Bill.
Now, the Income Tax (I-T) Department is going after those who might have been flouting the norms.
The department recently issued a warning, saying cash transactions of Rs 2 lakh or more will attract a penalty of an equal amount. “Contravention of Section 269ST would entail levy of 100 per cent penalty on receiver of the amount,” the department said in a public advertisement recently. Those having the knowledge of such a deal can also tip off the department about the transaction.
The government has decided to go stricter in this regard. Now, you will have to pay a service charge on all cash transactions of over Rs 2 lakh. Also, accepting cash of Rs 2 lakh or more from one person in a day or for one or more transactions relating to one event is now banned. There is more. Cash transactions of certain types, even if the amount is lower than the set limit of Rs 2 lakh, have been banned. For instance, one is banned from using Rs 20,000 or more in cash for transfer of immovable property. Also, paying more than Rs 10,000 in cash to a business or a professional is prohibited.
In real estate transactions — which are highly capital intensive — amounts of this size are paid as the earnest money to assure the seller of your genuine intentions of being interested in a deal. Now a seller receiving that kind of cash would certainly be in trouble. It would be, therefore, in the best interest of the buyer as well as the seller to use banking channels to pay even the smallest of the amounts.
This will not only keep the transaction legal but also help you in keeping a record. In case one party fails to meet the terms and conditions of any agreement it has entered into, the other party can challenge the decision legally, using the money trail as a proof.
Note that this restriction is not applicable to any receipt by the government, banking companies and post-office savings.
Also read: Is Demonetisation Illegal?