In India, there are restrictions on cash transactions to curb the circulation of black money and promote digital transactions. The restrictions on cash transactions were introduced as part of the government’s efforts to combat corruption and promote a more transparent economy.
As of now, the following restrictions are in place:
- Cash transactions above INR 2 lakh (approximately USD 2,700) are not allowed. Any payment above this limit must be made through electronic means like cheques, demand drafts, or digital payment modes.
- Cash donations above INR 2,000 to political parties are not allowed. Political parties are required to maintain a record of all donations received and report it to the Election Commission.
- Banks are required to issue travellers cheques, demand drafts, mail transfers, and telegraphic transfers for Rs.50,000 and above only by debit to customers’ accounts or against cheques and not against cash (Circular DBOD.BP.BC.114/C.469 (81)-91 dated April 19, 1991) Further, the applicants (whether customers or not) for the above transactions for amount exceeding Rs.10,000 should affix permanent (Income tax) account number on the applications (Circular DBOD.BP.BC.92/C469-76 dated August 12, 1976). Since KYC is now expected to establish the identity of the customer and as the issue of demand draft etc. for Rs.50,000 and above is by debit to account, the requirement for furnishing PAN stands increased uniformly to Rs.50,000/-.ash deposits above INR 50,000 in a single day in a bank account will attract additional scrutiny by the bank and tax authorities.
- REPAYMENT/ACCEPTANCE OF LOAN IN CASH ABOVE INR 20,000 MAY LEAD TO 100% TAX PENALTY.
- Cash payments for the purchase of goods or services above INR 10,000 are not allowed. Any payment above this limit must be made through electronic means.
- The banks are required to keep a close watch of cash withdrawals and deposits for Rs.10 lakhs and above in deposit, cash credit or overdraft accounts and keep record of details of these large cash transactions in a separate register. (Circular DBOD.BP.BC.57/21.01.001/95 dated May 4,1995).
- Branches of banks are required to report all cash deposits and withdrawals of Rs.10 lakhs and above as well as transactions of suspicious nature with full details in fortnightly statements to their controlling offices. Besides, controlling offices are also required to apprise their Head offices regarding transactions of suspicious nature. (Circular DBOD.BP.BC.101 /21.01.001/95 dated September 20, 1995). Early computerization of branch reporting will facilitate prompt generation of such reports
It is important to note that these restrictions are subject to change based on the government’s policies and the evolving economic situation in the country.