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Cash may no longer be king as e- money emerges new ruler

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Proposed ban on cash transactions above Rs.3 lakh may hit luxury goods, jewellery sales, real estate
You have just received cash as gift on your wedding and decide to buy that Rs.3.5 lakh Chanel bag you have been eyeing fora while. You walk into a treat a five- star hotel and pull outawad ofcash. Butthe sales person refuses to accept it and insists that you either pay by card or transfer money online.

It could soon become a reality if the government accepts there commendations of the Special Investigation Team (SIT) on black money headed by Justice MB Shah( retired) and ban cash transactions above Rs.3 lakh. This could impact sales of luxury goods, ranging from branded hand bags to cars and designer watches.“ No longer will people be able to walk into a luxury showroom and pay for these ultra expensive items by cash,” says Amit Maheshwari, partner, Ashok Maheshwary & Associates.

Not only that. If you are planning a do, and wanting to pay the decorator, cook, make- upartist, musician, transporters, etc, incash, it might get tricky. The amount one can keep at her premises is proposed to be capped at Rs.15 lakh. Infact, one may require prior approval from the Income Tax commissioner of the area to hold cash more than Rs.15 lakh.

“The proposal will discourage business people from doing large cash transactions and will bring down black money in the system,” says Kuldip Kumar, partner and leader, personal tax, PwC India.

Until now, whenever the I- T department found large accumulation of cash, people used to get away by paying tax and penalty on it. But things may change now. The SIT has recommended that there should be a total ban on cash transactions above Rs.3 lakh and a law should be framed to declare such transactions illegal and punishable.

Currently, all transactions above Rs.2lakh, irrespective of the mode of payment, require quoting of Permanent Account Number( PAN) and are subject to tax collection at source( TCS). For a cash transaction, whether for hotel or restaurant bills, foreign travel or bank deposits, PAN is required for payment of more than Rs.50,000. The tax department is also seeding Aadhaar with the PAN number toweed out multiple PANs. Real estate is another area where cash transactions happen frequently.

Although property transactions above Rs.10 lakh require furnishing of PAN, often builders ask for aportion of the payment in cash. Aprominent property broker in Gurgaon pointed out that all cash transactions don’t represent black money. Headded that under the NDA rule, there was amove to check flow of black money into real estate, thereby decreasing the volume and value of transactions to a large extent. That,  he said, had contributed to the slow down in the realty sector. If the SIT recommendations are accepted, the volume of real estate transactions may fall and the prices could show more weakness. According to estimates, 40 to  60 per cent of property transactions, especially in and deals, happen in cash.

But there is also a view in the real estate industry that the impact may not be that big.

Business Standard, New Delhi, 16 July 2016

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