Restrictions on Cash loans in income tax
Cash loans are restricted in income tax. A person can take only Rs.20,000 as loan in cash & any amount above Rs.20,000/- should be taken through cheque. U/s 269 SS, any amount of loan taken above Rs.20,000 in cash will attract a penalty equal to the amount of loan taken.
Similarly u/s 269 T any amount of loan repaid above Rs.20,000/- in cash will also attract a penalty equal to the amount of loan repaid.
Further if the person is subject to tax audit u/s 44AB, then the tax auditor also should disclose the fact of cash loan taken or repaid as mentioned above in excess of Rs.20,000/-. Hence i request all the people to be careful when we handle the transactions in cash.
Suppose in a partnership firm partner give the cash to firm for expenses and later draw it.
Whether this will be considered as Loan to firm or capital contribution and to be shown in capital current account?