Section 269SS, 269T, and 269ST (Penalty & Limit) FY-2024-25

Key Points

Section 269SS, 269T, and 269ST of Income Tax Act will prevent the economy from fraudulent cash transactions.
These sections set the limit upto which a person can accept loan, deposit and can repay the same in cash.
Limit is also set for cash receipts from a single person in a day.
If a person contravenes the provisions of these sections then a heavy penalty shall be levied.
Penalty shall be 100% of transactions, which is itself a huge penalty.

In the following we have explained in detail with examples section 269SS, 269T, and 269ST:

What is Section 269SS of Income Tax Act?

As per section 269SS, if a person is taking (accepting) loan, deposit or specified sum from any other person in excess of Rs. 20,000 in cash, then heavy penalty for the same may be imposed.

Section 269SS, 269T, and 269ST (Penalty & Limit)

So, under section 269SS, person shall only accept loan, deposit or specified sum by:-

Account payee cheque or
Account payee draft, or
Using electronic clearing system, or
Any other electronic mode

Person has to use above mentioned electronic system for accepting loan, deposit or specified sum only if:

1) Amount of loan, deposit or specified sum is Rs. 20000 or more.

Example: If Mr. X wants to take a loan from Mr. Y of Rs. 25000 then he shall not accept cash.

2) Aggregate of loan, or specified some is Rs. 20000 or more.

Example: If Mr X accepts a loan from Mr.Y Rs. 7000 and also accepts a deposit of Rs. 18000. So, in aggregate Mr. X accepts Rs. 25000 which exceeds Rs. 20000 then in this case he shall not accept such amount in cash.

3) A person has already taken a loan, deposit or specified sum and its outstanding amount is pending to repay.

In such a case, if the same person is also taking an additional loan, deposit for specified sum then aggregate of new and existing amount should be considered.

Example: If Mr. X has already taken a loan of Rs. 15000 and it is pending to repay, if he again takes a loan from the same person of Rs. 6000 then in aggregate Rs. 21000 exceeds the limit of Rs. 20000 then he has to use the electronic mode.

4) If amount or aggregate amount in point 1, 2 and 3 is Rs. 20000 or more.

So, in all the above cases one cannot accept the amount in cash otherwise a penalty shall be imposed.

Points to be noted

This section 269SS does not apply in cases where both loan giver (deposit on specified sum as the case may be) and loan acceptor have agricultural income only and they do not have any income chargeable to Income Tax.

Example: Mr. X (loan acceptor) and Mr. Y (loan giver) both have only agricultural income then section 269SS is not applicable. Person can accept the amount in cash.

Here ‘specified sum’ means any amount receivable as advance or otherwise, on transfer of immovable property.

Also Read: Section 115ba, 115baa, 115bab of Income Tax Act 1961

What is Section 269T of Income Tax Act?

Section 269T provides information regarding provisions related to mode of repayment of loans, deposits or specified advance.

Section 269T prohibits any person to repay loan, deposit or specified advance excess amount of Rs. 20000 in cash if a person wants to repay loan whose:

1) Amount of loan, deposit on specified advance (along with interest) is Rs 20000 or more.

Example: Amount of loan to be repaid is Rs. 12000 and interest thereon is Rs. 9000 then in aggregate it exceeds Rs. 20000.

2) Aggregate amount of loan, deposit or specified advance (along with interest) on the date of repayment is Rs. 20000 or more which is held in his own name or jointly with any other person.

Example: If Mr. X and Mr. Y, both have a joint loan account and they want to repay the loan of Rs. 25000 then cash repayment is not allowed.

So, above two situations person has to repay the loan by:

Account payee cheque or draft
Using electronic clearing system (NEFT/ RTGS)
Any other electronic mode

Point to be noted

Here ‘specified advance’ means amount receivable as advance on transfer of immovable property.

Also Read: Section 194N of Income Tax Act (TDS on Cash Withdrawal)

When section 269SS and 269T is not acceptable?

Following are the entities on whom section 269SS is not applicable (where loan, deposit or specified sum is ‘accepted from’ or ‘accepted by’) and section 269T (in case of repayment) if he pays to the following entities:

Government
Any banking company, post office savings bank, co-operative bank
Any corporation (established by central, state or provisional)
Any government company
Such other institutions, as notified.

What is the reporting requirement of section 269ss and section 269T in Form 3CD?

Auditor has to report the transactions related to section 269ss and 269T in clause 31 of Form 3CD.

What is Section 269ST of Income Tax Act?

Section 269ST prohibits the person to receive cash of Rs. 2 lac or more:

1) From a person in a day (in aggregate)

Example: Mr. X received cash Rs. 60000 in the first bill and again received cash of Rs. 170000 from the same person in a day then in aggregate cash receipt is 230000 which exceeds the limit of Rs. 200000.

2) In a single transaction

Example: Mr. X received cash of Rs 250000 in a single transaction.

3) In transactions related to one event or occasion from a person.

Example: Cash received in marriage events etc.

If a person wants to receive of cash of Rs.2 lac or more in the above mentioned situation than he can receive amount by:

Using account payee cheque or draft
Electronic clearing system, (NEFT/ RTGS)
Any other electronic mode as may be prescribed.

When section 269ST is not applicable?

This section 269ST is not applicable to:

Any receipt by the government, banking company, post office saving bank or co-operative Bank.
Transactions covered under section 269SS.
Such other people may be prescribed.

Also Read: Income Tax Slab Rates: Individual, Senior Citizens (FY 2021-2022)

What is the penalty of contravention under section 269SS, 269T and 269ST?

Contravention under section	Penalty Section	Amount of Penalty
269SS	271D	100% of Loan, deposit or specified sum accepted.
269T	271E	100% of Loan, deposit or specified advance to be repay.
269ST	271DA	100% of cash receipt.

So, if a person contravenes the provisions of this section then a heavy penalty shall be imposed.

Summary

Section 269SS, 269T and 269ST prevents fraud in large cash transactions. These will help to curb the black money. This section sets the limit of cash transactions for activities like loans, deposits, advances, cash receipts.