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Cash transaction of ₹2 Lakh? You may be liable to pay 100 percent penalty of the transaction amount to Income Tax
Banking / Finance

Cash transaction of ₹2 Lakh? You may be liable to pay 100 percent penalty of the transaction amount to Income Tax

image: The hindu business line. 

 

In the last financial budget, the government has come up with the introduction of Section 269ST of the Income Tax Act, which states in detail that Section 269ST “prohibits any person to receive an amount of Rs.2 lakh or more in cash”:

(i) In aggregate from a person in a day, or
(ii) In a single transaction, or
(iii) In respect of transactions relating to one event or occasion from a person .

 

Few examples to understand the new tax amendment:

 

  1. Suppose, Mr. X sells furniture worth Rs 4,50,000 and makes three different bills of Rs 1,50,000 and gives one to each person & accepts cash in a day, at different times, the Section 269 ST (a) will get violated.

 

  1. Secondly, Mr. Y sells gold worth Rs5, 00,000 through a single bill to another person and receives cash of Rs 2, 50,000 on the first day and the remaining on the next day, then Section 269ST(B) gets violated.

 

  1. Thirdly, Mr. Z accepts an order for catering, flowers & light decoration, occasion venue rent in respect for the event of marriage from Mr. A. He accepts cash of Rs 1,00,000 for the purpose of catering; Rs 1,50,000 for decoration; Rs 1,50,000 for the venue booking, then also section 269 ST(c) gets violated, even if he accepts cash on different dates because all the three transaction is relating to occasion of A’s marriage.

 

Thus, we can understand that in all the three cases, section 269ST gets violated and penalty u/s 271DA is applicable.

 

Penalty for violating Section 269ST:

If any person violates the provisions of Section 269ST or accepts any payment in conflict with the provisions, then he shall be liable to pay a penalty of sum which is equivalent to the amount of receipt under Section 271DA.

 

But in case the person can prove that there was sufficient and bonafied reasons for the breach of the section, no penalty shall be imposed.

 

However, it is being said that a transaction amount which is equivalent to Rs2 Lakh or more is permitted while doing transaction only through the use of electronic clearing system (which includes debit/credit card/Net Banking/IMPS/UPI/NEFT/RTGS/BHIM) via bank or account payee cheque or demand draft. Nonetheless, it can be said that this is an initiative taken by the government, in order to promote and boost up the digital economy.

 

Exemptions to Section 269ST of the Income Tax Act: 

 

  • Though this section is not applicable to any receipt of amount by the government, any banking company, post office savings bank or co-operative bank, or any other person/receipts as may be notified.

 

  • Also, transactions referred to in section 269SS (attracted when we accept loan from any person) will be excluded from the scope of the new section 269ST.

 

Thus, we can say that from now onwards cash transactions must be done vigilantly. Accepting any amount which is more than Rs 2Lakhs, received in form of cash, can impose penalty. This is to make the citizens more concern that transaction of lump sum amount of money must be done by the mode of bank payments only. Now-a-days, income tax laws are getting more firm for the taxpayers so that unaccounted income can be taken count of. 
What Is A Non-Compete Clause In An Employment Contract?
Agreement & Contract

What Is A Non-Compete Clause In An Employment Contract?

A non-compete clause is a provision in an employment contract whereby the employee agrees to the fact that he would not enter into any competition with the employer during the term of his employment or even after the employment period is over. Typically, a fixed period of time is agreed upon for restrictions that extend beyond the term of employment. Non-compete clauses are common in IT Departments, Media, Financial Industry, Corporate World.
 

Enforceability of Non-Compete Clauses

The non-compete clause in an employment contract is governed by certain provisions of the Indian Contract Act, 1872. Section 27, of the Contracts Act, makes agreements that are in restraint of trade void. 

 

A vast number of judicial decisions have emerged on the question of enforceability of non-compete clauses. These decisions are divergent, and hence, no clear answer to the enforceability of non-competes has emerged till now. We have discussed some of these case laws below: 

  1. In Superintendence Company of India (P) Ltd. v. Sh. Krishan Murgai, a question was raised as to whether a non-compete clause in an employment contract is valid. The court held that a contract, with the objective of restraining trade, was void.

  2. A similar case came up in Delhi High Court, wherein, the court observed that any law which restricts an employee from working after the termination of his job is in violation of the Indian Contract Act,

  3. In Arvinder Singh and Anr. v. Lal Pathlabs Pvt. Ltd. & Ors, the court observed that any agreement which restricts the person from carrying any professional activity is contrary to law. 


For fixed-term employment contracts, the restriction can be enforced under specific conditions. If an employee has resigned before the expiry of the term, then the restriction can be enforced for the rest. Non-competes may also be enforced against senior-level employees under certain conditions. If there is suspicion that a senior- level employee possesses proprietary information about the company, such an employee may be prohibited from joining a competing company by enforcing a non-compete clause.

Thus, a non-compete clause in an employment contract is not completely unenforceable and may be enforced in some circumstances. However, it should be drafted carefully and properly. 


Non-compete Clause v/s Non Disclosure Agreement

 

A non-compete agreement is different from a non-disclosure agreement. In a non-compete clause, an employee promises to not enter into any kind of competition with the employer after leaving the job. Whereas a non-disclosure agreement restricts an employee from revealing any confidential information of his previous employer to the current employer or anyone else in the future. While the enforceability of non-compete clauses is still not a settled issue, non-disclosure agreements may be enforced under the law. 

 

Conclusion


In India, any clause which restricts an employee from practicing any professional activity through a contract or an agreement is considered void under the law. The topic of whether a non-compete clause is harsh and extreme and whether it includes consultant is a debatable topic that will continue. However, whether such a clause imposed on an employee is harsh or not depends upon the circumstances of the situation, and the final call can be taken by the courts.
 

Decoding a Fixed Term Employment Contract
Agreement & Contract

Decoding a Fixed Term Employment Contract

A fixed-term employment contract is a contract wherein a company or an organization hires a person for a specific period on a contractual basis. Generally, such a contract is of one year; however, it depends on the need and discretion of the company or organization. Under this contract, the payment is fixed prior and cannot be changed or altered before the expiry of the term. 


Fixed-term employees have a right to the same amount of wages and working conditions as permanent employees. At the expiry of the fixed-term employment contract, the employer needs not provide any notice. However, if the employee continues to work even after the expiry of the fixed-term employment contract, then there is an implied agreement between the employer and the employee. 


What elements must be included in a Fixed-term Employment Contract?

 

The only difference between a fixed-term contract and a permanent contract is the period of time. An employee hired on a fixed-term employment contract is hired for a fixed period of time and cannot be removed except on account of some misconduct. Some of the key elements that need to be included in an employment contract are-:

 

  1. Job Title and Job Description: This includes a brief but specific description of the work one is expected to do.

  2. Duration or term of employment: Duration or term of employment becomes very important in a fixed-term contract. This lays down the term for which the employee has been engaged. 

  3. Hours of work: This clause lays down the work timings of the employee. 

  4. Place of work: The place of work or the location where the employee is stationed is required to be mentioned. 

  5. Leave and holidays: Typically, leaves and holidays, legally mandated, should be provided to the employee.

  6. Wages: The amount of wages, the mode of payment, etc., should be included in the contract. 

  7. Termination: Provisions that entitle both the employer and the employee to terminate the contract should be included in the contract. Termination upon expiry of the contract should also be provided. 

  8. Renewal: A provision for the renewal of the contract based on mutual consent of the parties should also be included in the contract.

  9. Boilerplate Clauses: Standard clauses such as jurisdiction, waiver, severability, etc., should also be included in a fixed-term contract.

 
 

Advantages of Fixed-term Employment Contract  

 

  1. Although a person is hired for a specific period of time, he/she is entitled to equivalent benefits that a permanent employee enjoys, such as safe and secure working conditions, similar pay, or sometimes more considering the skills of the concerned person. 

  2. A person hired under a fixed-term contract may be made permanent depending upon their performance.

  3. It is affordable for the employer when he needs an employee for a short term. 

  4. It helps get more specialized resources. 

 

Disadvantages of Fixed-term Employment Contract

 

  1. There is no stability, as the employment contract is time-bound and once the contract expires, the employee loses his job. 

  2. Typically, benefits such as promotion, good professional growth etc. are not available to fixed-term employees. 

  3. It is not an assurance of permanent employment. 

  4. For an employer, it may be more beneficial to have a talented pool of permanent resources. This will save the efforts of looking for an employee, every time the contract expires.

 

Conclusion

A fixed-term employment contract should be drafted in such a way so as to avoid any liabilities after its expiration. There should be no words that convey that the contract will be automatically renewed or that a more permanent role would be given to the employee. It is advisable to engage a lawyer while drawing up such a contract.