Union Budget had proposed a ₹3 lakh cap from April 1, 2017

The ₹3 lakh ceiling on cash transactions from April 1, 2017, proposed in the Union Budget 2017-18, has been revised to ₹2 lakh, with the government introducing an amendment to this effect in the Finance Bill cleared by the Lok Sabha on Tuesday.

The tightening of the cap on cash transactions was one of 40 amendments to the Finance Bill proposed by the Centre.

“In the official amendments to the Finance Bill, the government has proposed that the limit of ₹3 lakh for cash transactions, beyond which it is illegal, be reduced to ₹2 lakh. The penalty for violating this is a fine equivalent to the amount of transaction,” Revenue Secretary Hasmukh Adhia said in a tweet on Tuesday evening.

The cap on cash transactions was proposed as part of a slew of measures to promote cashless transactions enunciated in the Budget that was presented within three months of the demonetisation of high-value currency notes that accounted for 86% of the money in circulation last November.

The Special Investigation Team (SIT) on black money had suggested that no transaction above ₹3 lakh should be permitted in cash. “The government has decided to accept this proposal. Suitable amendment to the Income-tax Act is proposed in the Finance Bill for enforcing this decision,” Union Finance Minister Arun Jaitley had said in his Budget speech.