Understanding Cash Transactions
after withdrawal of Rs.2000 currency Note and its impact under Income Tax and
Money Laundering Regulations
Introduction
The Reserve Bank of India (RBI)
has withdrawn the Rs 2000 currency note and set a deadline of September 30,
2023, for exchanging or depositing these notes in banks.
People are choosing to spend the
notes in the market instead of depositing them.
Traders see this as an
opportunity to increase sales and recover debts, but they are concerned about
the strict KYC norms and the applicability of the Income Tax Act and Prevention
of Money Laundering Act for cash transactions.
The question arises about the
existing rules in force regarding these matters.
The
Income Tax Rules, 1962
Transactions exceeding Rs 2 lakh,
whether in cash or otherwise, require the customer's PAN to be quoted on the
sales bill.
This rule applies to all types of
businesses.
Individuals liable for audit
under section 44AB of the Income Tax Act must report all cash transactions
exceeding Rs 2 lakh for the sale of goods or services on a yearly basis using
Form 61A.
Section 269ST of the Income Tax
Act imposes penalties for receiving cash payments of Rs 2 lakh or more under
specified circumstances.
Prevention
of Money Laundering (Maintenance of Records) Rules, 2005
Reporting entities, such as
banks, financial institutions, intermediaries, and designated businesses or
professions, must verify the identity of customers for transactions equal to or
exceeding Rs 50,000.
This verification applies to
single transactions or multiple transactions that appear to be connected.
Reporting entities must maintain
physical and electronic records of client identities and transactions.
The
Prevention of Money Laundering Act, 2002
Reporting entities include
banking companies, financial institutions, intermediaries, and persons involved
in designated businesses or professions.
Dealers in precious metals and
stones must report cash transactions of Rs 10 lakh or more with a customer,
whether in a single operation or multiple linked operations.
Real estate agents with an annual
turnover of Rs 20 lakh or more are also considered reporting entities.
Conclusion
Jewelers engaging in cash
transactions of Rs 10 lakh or more, whether in a single operation or multiple
linked operations, are reporting entities and must verify the customer's
identity for transactions exceeding Rs 50,000.
Real estate agents with an annual
turnover of Rs 20 lakh or more are also reporting entities and must comply with
the rules and requirements.
These regulations ensure
compliance with income tax and money laundering prevention laws.
