Scroll Top

search-icon
    drop-arrow

    Cash Transaction

    Introduction

    A cash transaction refers to a transaction which involves an immediate outflow of cash towards the purchase of any goods, services, or assets. Cash transaction can be consumer-oriented or business-oriented.

    A cash transaction stands in contrast to other modes of payment, such as credit transactions in a business involving bills receivable. Similarly, a cash transaction is also different from credit card transactions.

    Understanding Cash Transaction

    The common definition of a cash transaction is an immediate payment for the goods or services bought. However, the term can have diverse meanings. For example, in the Indian stock market, a transaction of the purchase of sale in the delivery segment is cash transaction though the settlement happens on a T+2 basis.

    Cash transactions are different from transactions which involve a delay in delivery of the goods or delay in payment. Such transactions include credit sale, forward contract, futures contract, and other margin transactions.

    For example, in a futures contract, though the contract terms on price and quantity are agreed, the payment and delivery do not occur immediately.

    An example of a cash transaction is you walking into a store, buying clothes, and paying using a debit card. A debit card payment is the same as an immediate payment of cash as the amount gets instantly debited from your bank account. However, credit card payments are not the same in effect for the purchaser.

    In a credit card payment made by you, the amount is not debited from your bank account instantly. However, you are able to buy the product within your credit limit under the credit card. You need to make payment only after the generation of your credit card bill. Again, you enjoy a credit period until the last date available for payment.

    Conclusion

    From a business perspective, cash transactions above a threshold limit could face disallowance under the income tax law. A firm also needs to report all cash transactions beyond a threshold limit. However, from a consumer’s perspective, not all cash transactions are reportable.

    In India, the income tax law and reporting authorities generally track down high-value cash transactions through the PAN (Permanent Account Number) of the paying party.

    Index

    Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

    Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

    CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

    Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

    Cleartax is a product by Defmacro Software Pvt. Ltd.

    Company PolicyTerms of use

    ISO

    ISO 27001

    Data Center

    SSL

    SSL Certified Site

    128-bit encryption