Mumbai-based Vishal Gupta, who lost his father to Covid-19 in May last year, faces a new challenge. Gupta's family paid over Rs 9 lakh for the treatment of his father, out of which a majority amount was raised from friends and relatives. A part of the financial help they received was in the form of cash.
A social worker who helped the family hospitalise the patient last year recently apprised them of tax provisions that prohibit cash transactions among individuals as loan over a certain limit. Now the family of three brothers, employed in unorganised sector, fears being harassed by tax authorities.
A more recent case is of Noida's Manish Jha for whom the pandemic has come as added woe to his poor financial condition. When a family member tested positive for Covid-19 a few days back and required hospitalisation, Jha sought financial help from his acquaintances. While most of the payments were transferred electronically, some contribution was received in cash. He too faces similar risk like Gupta, but at the moment his priority is to ensure treatment to his ailing relative.
Section 269SS of the Income Tax Act, 1961 bars receipt of Rs 20,000 or more in cash as loan or deposit by an individual from another individual. Only electronic transfer or payment via cheque is allowed for such transfers. Also, any contravention is punishable as per the provisions contained in the Act.
The penalty is double the amount accepted in cash. "If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted," says section 271D of the Income Tax Act.
Chartered accountant Ved Jain, who is also the past president of the Institute of Chartered Accountants of India said, "Acceptance of loan of Rs 20,000 or more is prohibited and penalty is 100% of amount borrowed. There is a need for relaxing this restriction for borrowing for the purpose of Covid treatment."
Another CA points out to BusinessToday.In that at a time when the government has already exempted cash transaction over Rs 1 lakh at hospitals, the provisions under section 269SS and 271D must also be relaxed. Section 269 ST of The Income Tax Act, 1961 prohibits any cash transaction over Rs 2 lakh in a single day.
"Both need to go hand in hand. Relaxing only 269ST and leaving out 269SS will not help the families already struggling with the pandemic," said the CA on condition of anonymity.
As of now no case pertaining to income tax officials hounding such people, including Jha and Gupta, under the provision has come to the fore. An income tax source said that no demand or notice under the sections have been served to any assessee under the provisions.
That said, there is a worry and concern of finding oneself on the wrong side of the law among such people. Meanwhile, after being nudged by the Delhi High Court earlier last week to consider relaxing cash transaction cap of Rs 2 lakh to help Covid patients, the Central government issued a gazette notification facilitating cash payments over Rs 2 lakh to hospitals for Covid treatment.
* Vishal Gupta and Manish Jha's names were changed on request