Section 269ST – Clarification on the repayment of Loan Instalments in Cash

What is Section 269ST?

Section 269ST is considered as one of the important sections which were introduced by the Government with the intention of restricting Cash Transactions to curb Black Money and Tax Theft in the industry. Though this section simple in the front end but has various different angles which people faced in their practical life at the time of implementing this section.

Applicability of Section 269ST

The section 269ST states that, no person shall receive an amount of INR 2L or more:

  • In aggregate from a person in a day or,
  • In respect of a single transaction or,
  • 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.

Exclusions in Section 269ST

This section will not apply to-

  • Government
  • any banking company
  • post office savings bank
  • co-operative bank
  • other persons/receipts as may be notified

Transactions referred to in section 269SS (attracted when we accept a loan from any person) will be excluded from the scope of the new section 269ST.

Penalty

  • If any person does not comply with section 269ST then they have to bear the penalty specified U/s 271DA.
  • They shall be liable to pay any amount as a penalty equal to such amount receipt
  • However, there is an exception to section 271DA; According to section 271DA if a person proves that there were good and sufficient reasons for contravention of section 269ST then no person shall be liable

FAQs

What is difference between 269SS and 269ST?

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.

What is the limit for cash receipt?

Income Tax Act restricts any person to receive an amount of INR 2L or more in cash, from a person in a day, in respect of a single transaction or in respect of transactions relating to one event or occasion from a person, under Section 269ST.

Are cash payments illegal?

Paying wages in cash is legal and maybe more convenient. Some businesses deliberately use cash transactions to avoid meeting their tax and employee responsibilities. If you receive cash for work you do, you need to: be paid (at least) the correct award wages.

Compliance Portal: Tax liability on Cash Deposits

The taxpayers who have a large sums of cash deposits have to file the Income Tax Return. As per rule 114B, disclosure of PAN is mandatory in some transactions if cash of Rs.50,000/- or more is involved. Section 269SS has been further amended to include amounts received on the sale of a property. Statement of Financial Transaction (SFT) is required to be filed in respect of specified cash transactions.

Taxpayers who receive an SMS or any communication via call or email from ITD are likely to face some verification issues in their ITRs. Taxpayers can receive the SMS for three reasons:

  1. Not filed ITR or The ITR is not filed in the given assessment year and has potential tax liability pending.
  2. Details provided by taxpayers and Information received to the ITD don’t match for that particular assessment year.
  3. Significant transactions get reported to the Income Tax department during a financial year which is considered abnormal or out of line with the profile of the taxpayer.

Taxpayers who have received any such verification issue needs to submit a response on those issues raised. The response has to be submitted online by logging into the compliance portal.

Verification issue in the computation of tax liability for Cash Deposits

Code Description Response
A1 Correct Information Value Amount + Remarks
A2 Out of earlier income or savings Amount + Remarks
A3 Out of receipts exempt from tax Exempt income-wise list
A4 Received from identifiable persons (without PAN) PAN wise list
A5 Received from identifiable persons (without PAN) Person wise list 
A6 Received from un-identifiable persons Nature of transaction wise list 
A7 Others Amount + Remarks
A8 Unexplained amount A1- (A2+A3+A4+A5+A6+A7)

A1- Correct Information value

The total of all the amount paid for the purchase of the property has to be mentioned here. The purchase amount and all the expenses like stamp duty etc. In the case of co-ownership, the taxpayer should mention his/her share of investment and give details like name, PAN and share of other co-owners under the remarks section.

A-2 Out of earlier income or savings

If any part of the investment or expenditure is made out of earlier income or savings then it should be mentioned with the amount under this category. Suitable remarks are also required under the remarks section.

A3- Out of receipts exempt from tax

Available exemptions are listed below in the drop-down list. After choosing the relevant exemption the value of the receipt will be determined.

  • Interest income u/s 10.
  • Dividend income u/s 10(34)
  • Long-term capital gains on shares u/s 10(38).
  • Agricultural income u/s 10(1).
  • Share in the total income of firm/AOP etc. u/s 10(2A)
  • Income is not taxable in India.
  • Others

If this field is selected you will be displayed the following rows:

A4- Received from identifiable persons (with PAN)

If any amount is received from an identifiable person who holds a valid PAN, then his/her details are to be mentioned as per the following table:

The Transaction Type consists of:

  • Sales
  • Loan Received
  • Loan Repayment
  • Gift Received
  • Donation Received
  • Other Receipt.

The Transaction Mode consists of two options i.e ‘Cash’ and ‘Non-cash’. More rows can be added by clicking on the button ‘Add Row’. Suitable remarks are to be provided under the remarks section.

A5- Received from identifiable persons (without PAN)

If any amount is received from an identifiable person who doesn’t hold a PAN, then his/her details are to be mentioned as per the following table:

A6- Received from un-identifiable person

If any amount is received from an unidentifiable person, then his/her details are to be mentioned as per the following table:

A7- Others

If any amount which was not covered in any of the above-mentioned categories then it should be mentioned here. Suitable remarks are to be provided under the remarks section.

A8- Unexplained amount

This section computes a figure (A1 – (A2+A3+A4+A5+A6+A7)), for which no explanation is provided.

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FAQs

Is it necessary to login to Compliance Portal? What happens if I don’t log in?

Yes, it is advisable to log in to the compliance portal. If a taxpayer doesn’t log in he/she will not be able to respond to the issues raised.

What is an additional query request?

Upon examining the online response submitted by the taxpayer, ITD can raise an additional query request to seek further information/clarification from the taxpayer. The taxpayer needs to respond to the additional query request as well.

How will the taxpayer come to know about pending e-verification?

If there are any e-Verification issues it will be pushed to the compliance portal for e-verification, Email and SMS will be sent to the taxpayer informing about the issue raised. Taxpayers then need to respond to those issues raised.