Do you all know that Sec 269SS & 269T are applicable even to salaried people? Yes, As per Income Tax Act, these sections apply to all Companies, Partnership & individuals including salaried people.
These 2 sections are related to mode of TRANSACTIONS WITH others. Section 269SS talks about accepting Loans & 269T talks about repayment. Section 271D & 271E talks about penalty on contravention of Sec 269SS & 269T which is HUGE. This is equivalent to your Loan amount
Eg: If you receive loan of Rs. 30,000 by way of Internet transfer & later you pay by Cash, then 269T & 271E will apply. It may trigger penalty of Rs. 30,000.
For Business people & entities, Chartered Accountant has to report about 269SS & 269T transactions in his 44AB (Tax) audit report every year in Form 3CD. For Salaried person, these transactions will be checked only during Scrutiny (i.e. ITS)
Now Scrutiny is unavoidable to salaried persons, anyone may get notice for this. ITO may use these sections while scrutinizing your all bank statements unless you take proper precaution & care while transacting with people. Be kind to the people, But be serious to the transaction
Below extract will give you more insight on these sections
For Accepting Loan
Section 269SS was inserted by the Finance Act, 1984, with effect from 1 -4-1984 which lays down the mode of taking and accepting certain loans and deposits. Section 269SS reads as under:
"269SS Mode of taking or accepting certain loans and depositsNo person shall after the 30-6-1984 take or accept from any other person (hereinafter in this section referred to as the depositor), any loan or deposit otherwise than by an account payee cheque or account payee bank draft if:
(a) The amount of such loan or deposit or the aggregate amount of such loan and deposit; or
(b) On the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not);
(c) The amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b)
Is Rs. 20,000 or more:
Provided that the provisions of this section shall not apply to any loan or deposit taken or accepted from, or any loan or deposit taken or accepted by :(a) Government. (b) Any banking company, post office savings bank or co-operative bank.(c) Any corporation established by a Central, State or provincial Act. (d) Any Govt. Company as defined in section 617 of the Companies Act 1956(1 of 1956)
Explanation (iii) `Loan or deposit' means loan or deposit of money"
From the above reading of the aforesaid provision, it is manifestly clear that after the insertion of the aforesaid section, no person should take or accept from any other person from any loan or deposit otherwise than by an account payee cheque or account payee bank draft if the amount is Rs. 20,000 or more.
Section 271D lays dawn the provisions of imposition of penalty for failure to comply with the provisions of section 269SS.
271D: Penalty for failure to comply with the provisions of section 269SS(1).
If a person takes or accepts any loan or deposits in contravention of the provisions of section 269SS he shall be liable to pay by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted, 2. Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner".
For Repayment of Loan
Section 269T reads as follows:"Mode of repayment of certain loans or deposits - No Branch of a banking company or a co-operative bank and no other company of co-operative society and no firm or other person shall repay any loan or deposit made with it otherwise than by an account payee cheque or account payee bank draft in the name of the person who has made the loan or deposit if:
a. the amount of the loan or deposit together with the interest, if any payable thereon or
b. the aggregate amount of the loans or deposits held by such person with the branch of the banking company or co-operative bank or as the case may be the other company or co-operative society or the firm, or other person either in his own name or jointly with any other person on the date of such repayment together with the interest if any payable on such loans or deposits
c. is Rs. 20,000 rupees or more :
Explanation (iii) `loan or deposit' means any loan or deposit of money which is repayable after notice or repayable after a period and, in the case of a person other than a company, includes loan or deposit of any nature."
Section 271E of the Act reads as follows:
"If a person repays any (loan or) deposit referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the (loan or) deposit so repaid. Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner."
Golden Rule to avoid 269SS & 269T applicability & avoid penalty
1. Do not receive any loan by way of cash more than Rs. 19,999. Please note that explanation & reason for every cash depositinto your Bank account by way of ATM/Bank should be maintained & need to be submitted during Scrutiny. ITO may ask you to give explanation even Rs. 5,000 cash credited to your account. Avoid CASH DEPOSIT of Rs. 20,000 or more through ATM/Bank unless you have proper reason & document.
2. If you receive any loan (even for one day) from your friend/relative for Rs. 20,000 or more by way of account transfer or cheque payment. Please repay that amount by account transfer/cheque. Avoid CASH REPAYMENT
3. If you paid any Loan ( even for one day) to your friend/relative for Rs. 20,000 or more BY WAY OF ACCOUNT TRANSFER OR CHEQUE PAYMENT. Please receive that amount by account transfer/cheque. Avoid CASH RECEIPT
Its always better to keep in mind & take necessary precaution thinking that Taxman is beside you when you are transacting with others.
CA. CHIKKERUR C R,
B.Com, ACA, MBA, DISA & LLB