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Section 269SS: Mode of Accepting Loans, Deposits, and Specified Sums of Certain Types
To promote transparency and deter tax evasion, the Income Tax Act contains provisions like Sections 269SS and 269T to regulate specified cash transactions above Rs 20,000. Section 269SS prohibits accepting loans or deposits exceeding this amount in cash or other modes like bearer cheques. Section 269T prohibits repaying loans or deposits over Rs 20,000 in cash. Violating these sections invites penalty, further discouraging non-compliance. By restricting large cash deals and nudging taxpayers towards banking channels that enable audit trails, these provisions equip tax authorities with tools to curb black money circulation. Adhering to Section 269SS & 269T applicability is thus critical for all taxpayers and businesses to build a transparent, formal economy with reduced unaccounted cash flows.
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What is Section 269SS of Income Tax Act?
Section 269SS of Income Tax Act, 1961 contains provisions prohibiting accepting loans or deposits exceeding Rs. 20,000 in cash. As per the section, no person shall accept from any other person any loan or deposit or specified sum of Rs. 20,000 or more otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account. The term 'specified sum' has been defined in section 269SS of income tax act immovable property as any sum of money receivable related to the transfer of a, whether or not the transfer occurs. This provision aims to curb tax evasion and circulation of unaccounted money by promoting transparency in transactions through proper banking channels. Violation of Section 269SS attracts penalty under the Act.
Exemptions under Section 269SS of the Income Tax Act
Section 269SS amendment prohibits accepting loans or deposits exceeding Rs. 20,000 in cash. However, this section does not apply in some instances:
Exemption for Government Bodies
The prohibition does not apply to loans or deposits accepted by the Government, banking companies, post office savings banks, or cooperative banks. It also does not apply to corporations established under Central, State, or Provincial Acts.
Exemption for Specified Institutions
Loans or deposits accepted by Government companies, notified institutions, housing finance companies, public financial institutions, and NBFCs are exempt.
Exemption for Listed Companies
The section does not apply to loans or deposits accepted through the issue of bonds or debentures by listed companies.
Exemption for Specified Parties
Loans or deposits accepted from relatives, partners, directors, or members are exempt if conditions specified in the Act are satisfied.
Penalty on Dispute of Section 269SS
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If a person violates Section 269SS by accepting a loan or deposit exceeding Rs 20,000 in cash, he/she will have to pay a penalty.
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The penalty amount will equal the loan or deposit amount accepted in violation of the section.
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The Joint Commissioner of Income Tax is empowered to impose this penalty.
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The person will be allowed to be heard before imposing a penalty.
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This penalty provision ensures compliance with Section 269SS and deters cash transactions.
What is Section 269T of Income Tax Act?
Section 269T of Income Tax Act prohibits any person from repaying any loan or deposit or any specified advance otherwise than by an account payee cheque or an account payee bank draft or by use of an electronic clearing system through a bank account if the amount of such loan or deposit or specified advance is Rs. 20,000 or more. The term ‘specified advance’ means any sum of money acting as an advance, by whatever name called, for the transfer of immovable property, whether or not the transfer occurs.
Exemptions under Section 269T of the Income Tax Act
Repayment to Government, Banking Institutions, and Co-operative Banks
Loans, deposits, or specified advances repaid to or by the Government, any banking company, post office savings bank, or co-operative bank are exempted from the provisions of Section 269T.
Repayment to Corporations Established by Central, State, or Provincial Acts
Loans, deposits, or specified advances repaid to or by any corporation established under a Central, State, or Provincial Act are not covered by the restrictions imposed by Section 269T.
Repayment Involving Government Companies
Any transaction involving the repayment of loans, deposits, or specified advances to or by a Government company, as defined in section 617 of the Companies Act, 1956, is exempted.
Repayment to Institutions Notified by Central Government
Loans, deposits, or specified advances repaid to or by any institution, association, body, or a class of such entities, as notified by the Central Government in the Official Gazette, are exempt from the provisions of Section 269T.
Repayment in the Ordinary Course of Business
Loans, deposits, or specified advances repaid in the ordinary course of business by a company or institution engaged in providing housing finance, public financial institution, non-banking financial company, or housing finance company are exempt.
Penalty on Dispute of Section 269T
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If a person violates Section 269T by repaying a loan or deposit exceeding Rs 20,000 in cash, he/she has to pay a penalty.
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The penalty amount will equal the loan/deposit amount repaid in violation of the section.
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The Joint Commissioner of Income Tax can impose this penalty.
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Before imposing a penalty, the person will get a chance to be heard.
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This penalty ensures compliance with Section 269T and deters cash transactions.
What is Section 269ST of the Income Tax Act?
Section 269ST prohibits the receipt of Rs 2 lakh or more in cash. However, certain receipts are exempted from this provision.
Exemption for Government Bodies
The prohibition does not apply to receipts by the Government, banking companies, post office savings banks, or cooperative banks. It also does not apply to corporations established under Central, State, or Provincial Acts.
Exemption for Specified Institutions
Receipts by Government companies, notified institutions, associations, or bodies are exempt from the purview of Section 269ST.
Exemption under Sections 269SS and 269T
Receipts fulfilling conditions under sec 269 ss and 269T are also exempt.
Exemption for Notified Persons
The Central Government can notify certain persons or classes of persons to whom the prohibition will not apply.
Penalty on Dispute of Section 269ST
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If a person receives Rs 2 lakh or more in cash violating Section 269ST, they must pay a penalty.
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The penalty amount will be equal to the amount received in contravention.
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The Joint Commissioner of Income Tax can impose this penalty.
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Before imposing a penalty, the person will get an opportunity to be heard.
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This penalty provision ensures compliance with Section 269ST.
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It deters large cash receipts and promotes digital transactions.
Difference Between 269SS and 269ST, and, 269T of the Income Tax Act
The following table compares the main features of Section 269SS, 269T, and 269ST of the Income Tax Act:
Section | Applicability | Threshold Limit | Mode of Payment | Penalty |
|---|---|---|---|---|
269SS | Acceptance of loan or deposit or specified sum | Section 269SS limit is of Rs. 20,000 or more | Account payee cheque or account payee bank draft or electronic clearing system | Equal to the amount of loan or deposit or specified sum accepted |
269T | Repayment of loan or deposit or specified advance | Rs. 20,000 or more | Account payee cheque or account payee bank draft or electronic clearing system | Equal to the amount of loan or deposit or specified advance repaid |
269ST | Receipt of any amount | Rs. 2 lakh or more | Account payee cheque or account payee bank draft or electronic clearing system | Equal to the amount of receipt |
Conclusion
Sections 269SS and 269T of the Income Tax Act are significant regulations designed to reduce cash transactions and increase transparency in your financial operations. They prohibit you from receiving and repaying loans, deposits, or specified cash payment more than 20000 income tax in a single day, with limited exceptions. Violations of these clauses may result in significant fines and punishment under the Act. As a taxpayer, you should be aware of these provisions and must adhere to them. This allows you to avoid needless tax issues while contributing to the nation's economic progress.
We hope this article has helped you understand the basics of Sections 269SS and 269T of the Income Tax Act. If you have any questions or feedback, please feel free to contact us at Taxbuddy.com. Thank you for reading!
​Frequently Asked Questions
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What are Sections 269T and 269SS of Income Tax Act?
A
Sections 269SS and 269T deal with restrictions on cash payments and repayment of loans and deposits. They were introduced to prevent tax evasion through the use of unaccounted cash.
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What is the 269T of Income Tax Act limit, if you want to repay a loan or deposit?
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Can the property be acquired with cash?
A
The Income Tax Act prohibits taking cash over INR 20,000 in a real estate transaction. As a result, you cannot take cash as compensation for the sale of the property. The property must be registered at the actual transaction price.
Q
What is clause 31 of Form 3CD?
A
Section 31 of Form 3CD requires the tax auditor to report any transactions that violate Sections 269SS and 269T of the Income Tax Act. These sections prohibit cash payments above a certain limit.
Prachi Jain
Chartered Accountant
Prachi Jain is a Chartered Accountant with a passion for simplifying finance and tax-related matters through her insightful and informative blogs. With a background in finance and a deep understanding of tax regulations, Prachi has established herself as a trusted source of financial wisdom. Prachi is committed to empowering her readers with the knowledge they need to make informed financial decisions. Her expertise and dedication shine through in every blog post, helping her audience navigate the intricacies of finance and taxes with confidence. Follow Prachi Jain's blog for practical insights and guidance on managing your finances effectively.
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