The Income Tax department wants you to use cash responsibly so that you don’t get into any trouble as far as compliance with income tax laws are concerned. The Income Tax department says you can’t claim any tax deduction if you use cash for transactions like donations to political parties, rural development, etc. Moreover, the law also mentions that if you use cash for conducting transactions, then in certain circumstances you can’t claim expenses as deductions against your income thereby inflating your income and thus increasing your tax liability.

"The brochure issued by the Income Tax Department points out various provisions wherein excess payment made by way of cash will be deemed as income. This also indicates how the government is focused on reduction of illicit cash payments and formalisation of the economy.