Stricter controls over small cash flow by companies;

Payments exceeding ₹ 10,000/- in cash made by such entities shall be disallowed

In order to control the cash economy and increase TDS compliance, the Union  Finance and Corporate Affairs Minister Shri Arun Jaitley proposed to impose restriction on entities incurring expenditure in cash without paying tax.

Presenting the General Budget 2018-19 in Parliament here today, the Finance Minister said, “Currently, the income of trusts and institutions is exempt if they utilise their income towards their objects in accordance with the relevant provisions of the Income-tax Act. However, there is no restriction on these entities for incurring expenditure in cash. In order to have audit trail of the expenses incurred by these entities, it is proposed that payments exceeding ₹ 10,000/- in cash made by such entities shall be disallowed and the same shall be subject to tax.”

Further, in order to improve TDS compliance by these entities, the Finance Minister proposed to provide that in case of non-deduction of tax, 30% of the amount shall be disallowed and the same shall be taxed.

Restrictions on cash payments: cash payments above the prescribed limit disallowed and non-deduction triggers significant disallowance. The Budget proposes that cash payments by trusts, institutions and similar entities exceeding Rs. 10,000 shall be disallowed as expenditure and taxed, and that in cases of non-deduction of tax a 30% disallowance of the amount shall apply and be taxable, to strengthen audit trails and improve TDS compliance.