The section seeks to minimise or reduce cash receipts. To quote from the press note issued by the Finance Ministry, Various legislative steps have been taken by the Finance Act, 2017 to curb black money by discouraging cash transaction and by promoting digital economy.
These prominently include placing restriction on cash transaction by introduction of new sections 269ST & 271DA to the Income-tax Act. The former one provides the restriction and the latter section talks about penalties for contravention of the provisions of section 269ST.
The burden of compliance is put on the receiver of cash and not the person who makes the payment
The section as introduced is reproduced below:
269ST. No person shall receive an amount of two lakh rupees or more-
(a) In aggregate from a person in a day; or
(b) In respect of a single transaction; or
(c) In respect of transactions relating to one event or occasion from a person,
Otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account:
This therefore covers receipt
- from a single person in a day in respect of multiple transactions,
- receipt in respect of a single transaction and thirdly
- in relation to one event or occasion in respect of multiple transactions
Certain clarifications have been received from the Ministry of Finance on the issue of transaction/transactions and exempted transactions.
Circular No. 22 of 2017 dated 3rd July 2017 states that it is clarified that in respect of receipt in the nature of repayment of loan by NBFCs or HFCs, the receipt of one instalment of loan repayment in respect of a loan shall constitute a ‘single transaction' as specified in clause (b) of section 269ST of the Act and all the instalments paid for a loan shall not be aggregated for the purposes of determining applicability of the provisions section 269ST.
Under Proviso to section 269ST (i) (b), it is mentioned that that the provisions of this section shall not apply to-
(i) Any receipt by-
(b) Any banking company, post office savings bank or co-operative bank
Since the exemption is already available to the banking sector, other lending institutions like Housing Finance Companies and Non-Banking Finance Companies get a breather in that the single transaction referred to in section 269ST will be one instalment of repayment and not aggregate of all instalments.
This circular has provided an extra outlet to collect instalments in cash subject to being less than Rs 2lacs per instalment.
The Government through Notification No. 57 /2017, F.No.370142/10/2017-TPL dated 3rd July 2017 has provided exemptions from the application of the section in the following cases:
- cash management correspondents collecting cash from retail outlets for consolidation and credit to the bank account of the constituent from whose retail outlets the collections were made
- ATM cash management operators collecting cash from retail outlet sources on behalf of a banking company
- Cash collected from an agent by persons authorised to operate the Pre-paid payment systems approved by RBI (Paytm/BHIM etc.)
- Cash collected by credit card issuing banks in respect of bills issued against one or more credit cards
- Cash awards received and exempt under section 10(17A) of the Income Tax Act, 1961.
Thus the following will get covered under section 269ST:
A receives in a single day Rs 2,00,000 from B who may be paying either for himself or on behalf of others
Cash received from borrower who repays the loan or interest in cash of Rs 2,00,000
- In the above case the recipient will be violating section 269ST and
- The remitter is violating the provisions of section 269T which states that any repayment of loans in excess of Rs 20,000 shall be through the banking system only
Cash received on various dates by A against sale of goods to B for an amount of Rs 2, 00,000. In this case the key factor is not the single day but single transaction ( one invoice is one transaction)
Cash received by a marriage caterer an amount of Rs 2, 00,000 on various dates from various members of the family which performed the marriage. Here the key factor is one single event or occasion. Hence the multiple transactions are aggregated and considered for compliance of section 269ST
A takes a loan of Rs 2,00,000 from B in cash
- The above transaction comes within the provisions of section 269SS where the limit of accepting loans in cash is Rs 20,000 and not Rs 1, 99,999 indicated in section 269ST.
- Violation of the provisions of section 269SS by A
A repays the loan to B in cash - Rs 2,00,000
- A violates the provisions of section 269T that restricts the cash repayment of loans to less than Rs 20,000 ( and not Rs 2,00,000 indicated in section 269ST)
- Violation by B of section 269ST - cash receipt of Rs 2,00,000 against a single transaction ( loan repayment is a single transaction)
Monthly EMIs paid to NBFCs and HFCs are exempt from the applicability of the provisions of section 269ST
Provisions of section 40A(3) shall be applicable to the person who makes the payment if the expenditure paid is in cash and is in excess of Rs 20,000/- ( Rs 10,000 w.e.f 1.4.2018)
Penalties for violation of the restrictions on cash receipts under section 269ST
Nature of default
Receiving an amount of Rs. 2 lakh or more from a person in a day [section269ST]
Amount equal to such receipt
The powers of the Principal Commissioner or Commissioner under section sections 273A or 273AA or 273B to waive or reduce the penalties do not cover the penalty imposed under section 271DA - However, the penalty shall not be levied if the person proves that there were good and sufficient reasons for such contravention.
The attempt is from the cash recipient's side to curb cash transactions.