On Thursday, the RBI backtracked on his Rs 5000 deposit limit

Single cash payments over Rs 2 lakh need to be reported
news Demonetisation Friday, December 23, 2016 - 16:52

On the requirement for reporting cash payments exceeding Rs 2 lakh for sale of goods or services, the government on Friday clarified that the rule applies only to single transactions, which are not required to be aggregated for the purpose.

The Central Board of Direct Taxes (CBDT) has clarified that reporting requirements as per the rules are applicable when a single transaction involves receipt of cash payment exceeding Rs 2 lakh for sale of goods or services, signifying that no aggregation is required, a Union Finance Ministry release here said.

"Any person who is liable for audit under section 44AB of the Income-Tax Act, 1961, is required to furnish a statement in respect of transaction relating to receipt of cash payment exceeding Rs 2 lakh for sale of goods or service," it said

"Doubts were raised if such transactions are required to be aggregated for reporting.

"CBDT has clearly indicated that the said transactions did not require aggregation and the reporting requirement under SFT (Statement of Financial Transactions) for this purpose is on receipt of cash payment exceeding Rupees Two Lakh for sale of goods or services per transaction," it added.

On Thursday, in its 60th circular issued since November 8, the Reserve Bank of India issued a notification withdrawing the limit of Rs. 5000 in deposits of old Rs 500 and Rs 1000 notes for KYC-complaint accounts.

In its circular issued on Wednesday, the central bank said that after a review the cap of Rs 5000 is being withdrawn. 

According to the earlier notification, when a person deposits over Rs 5,000 in withdrawn currencies, the account will be credited only after questioning him or her, in the presence of two bank officials, as to why the notes had not been deposited earlier. The bankers were to keep the explanatory statement on record for a future audit trail. 

The decision created confusion, when Jaitley contradicted the RBI notification, saying people will not be questioned if any amount of old currency is deposited in one go, but repeated deposits may provoke queries.