Section 269SS & Section 269T deal with cash payment and repayment of loans and deposits. Both the sections were introduced to curb the black money. Tax evasion is one of the serious problems in India causing economic disparities. In other words, these sections were introduced to curb the increasing cash transactions which are leading to the accumulation of black money as these sections restrict such cash payments.
What is Section 269SS
An individual cannot accept loan or deposit or any other specified sum from another person via an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account if:
- Amount of loan or deposit or specified sum is INR 20,000 or more, or
- Sum total amount of loan, deposit, and the specified sum is INR 20,000 or more. For example, an individual wants to take a loan of INR 6,000, a deposit of INR 9,000, and an advance of INR 7,000 from his friend, he cannot accept it in cash because of the total sum is INR 22,000
- In a case where a person had already received a loan, deposit, or specified sum from the depositor but the loan or deposit or specified sum hasn’t been paid back in such case, if the unpaid loan or deposit or-specified sum is INR 20,000 or more, or
- Sum total amount of (1), (2), and (3) is INR 20,000 or more. Therefore, a person cannot accept a cash loan or deposit of INR 20,000 or more from another person
Exceptions to Section 269SS
- Any loan taken or accepted from or taken or accepted by the following entities:
- Any banking company, post office savings bank, or cooperative bank
- Corporations established by a Central, State, or Provincial Act
- Any government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013)
- Any institution or body or class of institutions notified in the Official Gazette
Thus, if any person accepts any loan or deposit or specified sum from the above-mentioned entities, or the entities accept any loan or deposit or specified sum from any person, provisions of Section 269SS will not apply.
- A person earning only agriculture income accepts a loan or deposit from another person also earning only agriculture income
- Receiving cash from relatives during emergencies. In such cases, the intention should not be to evade the taxes
- Partners contributing cash capital into a partnership firm
Penalty for Violation of Section 269SS
100% of the loan or deposit amount will be the quantum of penalty that can be levied by the assessing officer.
What is Section 269T
Section 269T prohibits any person to repay the loan or deposit or specified sum otherwise than by an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, if:
- The amount of loan or deposit, including interest amount, is INR 20,000 or more, or
- The aggregate amount of loans or deposits, including the interest amount, held by such person in his own name, or jointly with any person, is INR 20,000 or more
In other words, a person cannot repay the loan or deposit in cash, if the amount is above INR 20,000.
Exceptions to Section 269T
An individual paying INR 20,000 or more towards repayment of loan or deposit does not have to comply with Section 269T if he/she pays to the following parties:
- The government
- Any banking company, post office savings bank, or co-operative bank
- Other notified institutions
- Any Government company as defined in section 617 of the Companies Act, 1956
- Any corporation established by a Central, State or Provincial Act
Penalty for Violation of Section 269T
100% of the loan or deposit amount will be the penalty leviable by the assessing officer.
No, this will be a violation of section 269T i.e. a person cannot repay a loan amounting to more than INR 20,000 in cash.
Except for the transactions referred to in Section 269SS and other receipts as exempted by Central Government by notification, Section 269ST of the Act shall apply to every receipt whether taxable or tax free, whether capital or revenue.
The income tax act restricts accepting cash in excess of INR 20,000 in a real estate transaction. So, you cannot accept cash consideration on sale of the property. The property is to be registered at actual sales consideration.