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Section 269ST- Treatment of Cash Transactions above Rs. 2 Lakhs

CA Piyush Agarwal 
on 06 January 2020

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You can repay your loan amount to any HFC (Housing finance company) or NBFC (Non-banking finance company) in cash provided each loan installment is less than Rs 2 lakhs.

Section 269ST- Treatment of Cash Transactions above Rs. 2 Lakhs

The government in the last budget introduced Section 269ST. Under the section, cash transactions exceeding Rs.2 lakhs are prohibited with a view to promote digital economy.

According to provision of Section 269ST- No person shall receive an amount of two lakh rupees or more

  • In aggregate from a person in a day
  • In a single transaction
  • In respect of transactions relating to one event or occasion from a person

Exclusions from the scope of section 269ST: 

  • Government
  • Any Banking Company
  • Post office savings bank
  • Co-operative bank
  • Any other person as notified by the Central Government
  • Transactions referred to section 269SS (attracted when we accept loan from any person) will be excluded from the scope of the new section 269ST.

Examples:

Single Person: Cash Receipt of Rs 2 lakh or more, from a single person in a day is not allowed even if the amount has been paid through multiple transactions during the day which are below Rs 2 lakh.

If Ganguly sells goods worth Rs 4,50,000 through three different bills of Rs. 150,000 each to Dravid and accepts cash in 1 single day at different times then section 269ST(a) will get violated.

Single Transaction: Cash receipts of Rs 2 Lakh or more which are related to a single transaction are prohibited.

If Sachin sells goods worth Rs 500,000 through a single bill to Sehwag and receives cash of 2,50,000 on day 1 and another 2,50,000 on day 2 then section 269ST(b) will get violated.


 

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Single Event / Occasion: Cash transactions or cash receipts related to a single event or occasion, cannot be more than Rs 2 Lakh.

Dhoni accepts an order of catering, decoration and tent for the marriage event of Virat. He accepts cash of Rs.1,00,000 for catering, Rs 1,50,000 for decoration and Rs.1,50,000 for tent work then section 269ST(c) will get violated even if cash is accepted on different dates. All the cash transactions relate to the same occasion- marriage of Virat.

In all the three cases, section 269ST gets violated and penalty u/s 271DA is applicable.

Introduction of Penal Provisions

The government has also introduced penalty provisions if Section 269ST is violated. If a person receives the amount in cash over the above specified limit of Rs.2 lakhs, he is liable to pay a penalty equal to the amount received in cash (Section 271DA). Thus, it is very important to ensure that you do not receive cash of Rs.2 lakhs and above in a single transaction, aggregate from a person in a day, or in respect to transactions relating to one event or occasion from a person.

The scope of section 269ST are very wide: -

Irrespective of whether

  • Tax-free Income
  • Taxable Income
  • Capital Nature
  • Revenue Nature
  • Business Purpose
  • Personal Purpose

Other Important Points on Section 269ST:

It has been clearly stated that penalty (if any) is chargeable to an individual who violates section 269ST, even if you do not have PAN and/or is not a tax assessee.

Based on my interpretation of Section 269ST, payment modes like bearer cheque and self-cheque will also be considered on par with Cash-based transactions only.

Kindly note that the payer of money is not liable to pay any penalty, it is the receiver of cash who has to bear the penalty u/s 271DA.

Payment of above Rs 10,000 per person, cannot be made for any business payment towards any expenses (or) purchase of the capital asset.

Note: 

After introducing this section, various representations were sent by NBFCs and HFCs as to whether the limit of Rs.2 lakhs shall apply to one installment of loan repayment or for the whole amount of such repayment.

In this context, the income tax department clarified that if you are repaying the loan to NBFCs or HFCs, the one installment of loan repayment shall constitute a single transaction. And so if the single loan installment amount is less than Rs.2 lakhs, it can be paid in cash. All the installments paid for a loan shall not be aggregated for the purposes of determining the applicability of Rs.2 lakh limit.


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Category Income Tax
Other Articles by - CA Piyush Agarwal 




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