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-
any banking company
post office savings 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.
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
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.
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:
Not filed ITR or The ITR is not filed in the given assessment year and has potential tax liability pending.
Details provided by taxpayers and Information received to the ITD don’t match for that particular assessment year.
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.
Verification issue in the computation of tax liability for Cash Deposits
Correct Information Value
Amount + Remarks
Out of earlier income or savings
Amount + Remarks
Out of receipts exempt from tax
Exempt income-wise list
Received from identifiable persons (without PAN)
PAN wise list
Received from identifiable persons (without PAN)
Person wise list
Received from un-identifiable persons
Nature of transaction wise list
Amount + Remarks
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.
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:
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:
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.
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.
With the use of Data analytics, the Income Tax Department (ITD) has compared the data post demonetization with the information available in ITD databases. And identified taxpayers whose cash transactions do not appear to be in line with their profiles. Taxpayers are required to verify transactions identified by ITD through their e-filing account.
How to view information relating to cash transactions?
The information relating to cash deposits will be displayed in the e-filing account of a PAN holder. So first register on the e-filing portal, to view cash transaction-related information. A taxpayer can view the information as follows:
Select the response as per your case. In case the first option is selected then the taxpayer is required to provide the details including the source of cash deposits. Various categories for providing the explanation of cash deposits are:
Cash out of earlier income or savings
If Cash is out of receipt exempt from tax
Cash is withdrawn out of bank account
Cash received from identifiable persons (with PAN)
Receipt of cash from identifiable persons (without PAN)
Cash received from un-identifiable persons
Cash disclosed/to be disclosed in Pradhan Mantri Garib Kalyan Yojana (PMGKY)
How to view submitted response?
You can view your submitted responses by clicking on the View button against the respective Bank account under ‘Cash Transactions 2016’
You can click on Transaction No / Download PDF to view or download your response.
IT Department uses Data analytics to select the cases for further verification. A taxpayer will receive an e-mail concerning the additional information required. A taxpayer can submit the response to it online as well.
A link ‘Additional Information Request Pending’ will appear on top of the list of bank accounts as shown below.
Once the response is submitted, the link will be updated as ‘Additional Information Request’
What should I do if the account displayed belong to my spouse/parents?
Even if the account belongs to your spouse or parents, you need to select the response ‘The Account does not relate to this PAN’ and submit. You only need to provide a response if an account belongs to your PAN.
How do I show my income received from tuition fees?
In the case of cash receipts from your business/profession, you need to report them as ‘Cash Sales’ under ‘Nature of Transaction’.
How will I know whether additional information is required or not?
You will receive an e-mail from the IT Department if your case is selected for verification. And the request for additional information will be displayed on your e-filing account on the portal.
Can I revise the response which I have already submitted?
Yes, you can re-submit your response with corrections/revisions.
Whether all cases will be selected for verification?
No. IT Department will use Data analytics to select cases for verification, based on approved risk criteria.