CA Pratik Anand

In the final draft of the finance bill’2017, the government is proposing to ban all transactions in cash above Rs. 2 lacs from 01.04.2017.

If and when the proposed amendment to the finance bill’2017 is passed by the parliament then any person who enters into a transaction above Rs. 2 lacs in cash, will be liable to a penalty of an amount equivalent to the amount of transaction.

Proposed New Section 269ST reads as under:

No person shall receive an amount of two lakh rupees or more—

(a) in aggregate from a person in a day; or 

(b) in respect of a single transaction; or 

(c) in 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: 

Provided that the provisions of this section shall not apply to—

(i) any receipt by—

(a) Government;

(b) any banking company, post office savings bank or co-operative bank;

(ii) transactions of the nature referred to in section 269SS;

(iii) such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.

Therefore, in light of the above the government has proposed to ban all types of transactions in cash above Rs. 2 lacs.

The important points to note in respect of the above are as follows:

1) The restriction is on receipt of cash and not on payment of cash above Rs. 2 lacs:

Any person who receives above Rs. 2 lacs in cash will be liable to penalty equivalent to the amount received.

There is no restriction on payment of cash. However, it is to be noted that there is an existing provision for restricting cash payments above Rs. 20,000/- for business purposes. This provision has also been amended and now cash payments above Rs. 10,000/- shall not be allowed as expense in the income tax return.

2) Receiving cash above Rs. 2 lacs in a day from a person is not allowed:

Receipt of more than Rs. 2 lacs from a single person in a day is not allowed even though the amount has been paid in multiple transactions during the day which are below Rs. 2 lacs.

3) Receipt exceeding Rs. 2 lacs for a single transaction is not allowed:

For example, if a transaction is for Rs. 7 lacs, then a single payment for such transaction cannot exceed Rs. 2 lacs.

4) Receipt above Rs. 2 lacs in respect of a single event or an occasion from a person: 

The most common example of occasion is marriage, therefore a person cannot receive more than Rs. 2 lacs in cash for such occasion from a person.

Also important to note that this limit on an occasion is not limited to per day basis therefore receipts even on various days in respect of a single event or occasion aggregating above Rs. 2 lacs is prohibited.

If the receipts are from different persons, the same would not be covered by the third circumstance, even if the same relates to a single event or occasion.

5) What can be the case which is not covered under all the three circumstances?

Receipts from same person are permitted if the same is below the specified limit and on different days. If the same is not in relation to a single transaction and/or same event/occasion.

6) Nature of receipt does not matter

Another important point to be noted in respect of the proposed new section is that the nature of receipt does not matter.

Therefore, even if a person receives a sum which is not chargeable to tax still he would be hit by the provisions of this section and would be liable to penalty.

Receipts can be anything such as proceeds of sales of goods, income of whatsoever nature – taxable or not, gifts, capital receipts, loans, advances, government grants, subsidies, encashment of bonds/securities, encashment of instruments like National Savings Certificates, proceeds of Life Insurance Policies, scholarships, sale of shares, transactions between related parties and so on.

The nature of receipt is very wide and it would be interesting to see if the government exempts any circumstances in the future.

7) Who are the persons and what are the transactions exempted from section 269ST?

The proposed section 269ST would not be applicable in following cases:

“(i) any receipt by—

(a) Government;

(b) any banking company, post office savings bank or co-operative bank;

(ii) transactions of the nature referred to in section 269SS;

(iii) such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify”.

Therefore, if Govt. or a banking company receives any sum in contravention of this section, they would not be liable to any penalty.

Another interesting point to note is that receipt of money from a banking company is not exempted. Therefore even cash withdrawal in contravention of the above limits can be hit by the provisions of the proposed section 269ST.

8) What are the other points that should be kept in mind in respect of Section 269ST?

Some of the other relevant points to be considered are:

  • It is irrelevantthat the person receiving the cash has a PAN or not and whether such person is assessed to income tax or not. 
  • Source of income of the recipient is irrelevant and nature of receipt of such person is also irrelevant.
  • This section would also apply to transactions between related persons.
  • The provisions would also apply to transactions between persons who are otherwise exempt from tax.
  • Restriction would apply on all persons/entities except those which are specifically exempted like banks etc. Therefore, section 269ST will be applicable on receipt of money by all persons such as individuals, HUFs, firms, companies, trusts, charitable Institutions, AOPs/ BOIs etc.

9) What are the modes of receipt which are not allowed?

Some of the modes of receipt which are not allowed are cash, bearer cheque, crossed cheque, self cheque, adjustment or transfer entry in the books of account.

However, going by the literal interpretation of the section any receipt of money other than by account payee cheque or account payee draft is not allowed. Whether this would cover transfers by e-payment wallets like Paytm etc which are very common these days will have to be clarified soon.

10. Section is applicable to receipts irrespective of the fact that they are with or without consideration.

Section 269ST is applicable to receipts irrespective of the fact that they are with or without consideration.

In case of receipts without consideration, there can be dual impact of penalty under this section and under section 56 of the Income Tax Act’ 1961 in some specific cases.

11) What is the penalty for violating section 269ST?

The Govt. proposes to introduce a new section prescribing penalty for violating the provisions of section 269ST. As per this section:

(1) If a person receives any sum in contravention of the provisions of section 269ST, he shall be liable to pay, by way of penalty, a sum equal to the amount of such receipt.

(2) The penalty will be not be levied if such person proves that there were good and sufficient reasons for the contravention.

What are good and sufficient reasons will be decided on a case to case basis by the joint commissioner as the joint commissioner has the power to levy such penalty.

(The author is a CA in practice at Delhi and can be contacted at: E-mail: contact@capratikanand.com, Mobile: +91-9953199493)

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Tags : Budget (1466) Budget 2017 (342) CA Pratik Anand (50) Section 269ST (18)

43 responses to “Cash Transactions above Rs. 2 lakhs banned from 01.04.2017”

  1. Vipul Patel says:

    Can i deposit cash of Rs.20,000/- or more per month in my saving
    account as salary received.
    Kindly clarify the max. limit as cash can be deposited in bank per
    month as salary received.

  2. Bharat says:

    Can i deposit cash of Rs.20,000/- or more per month in my saving
    account as salary received.
    Kindly clarify the max. limit as cash can be deposited in bank per
    month as salary received.

  3. Pravin says:

    Hello sir
    I am retailar for mobile recharge and daily cash receipt and withdrowal 15000 and more montly avrage 300000 and more sec 26
    9st aplicable mi ya not. Please tell mi.

  4. Gaurav says:

    Sir i am a retail dealer and myu transaction is only in cash.. I sale garments for cash..and some times i sale the garments on a single day for mre than 2 lacs to different persons and issued the cash bills whether 269 st attracted

  5. Prakash says:

    Dear Sir ,
    Please Clarify me that I made bill rs 10000/- in 19 bill that sum amount is rs. 190000/- is one party that will possible or not

  6. Sidhant says:

    Is cash billing allowed above rs10000?

  7. Sidhant says:

    We have done sale proceed of rs15000 cash in a single bill. Can we receive it in cash?

  8. Sukesh Bansal says:

    I withdrawal rupees 3.5 lac on 3 April 2017 from my cash credit limit. Am i guilty?

  9. VINOD MITTAL says:

    IF A TRADER SOLD THE GOODS FOR RS.250,000/- AND HE RECEIVES THE AMOUNT RS 10,000/-PER DAY, IS SECTION IS VIOLATED.

    • Vineet Ku. PAtel says:

      Yes, as per condition no 3, i.e in respect of transactions relating to one event or occasion from a person.

    • DEEPAK KUMAR ARYA says:

      Dear Sir

      I am doing a business of whole sale. and i am raised a bill of Rs 2.50 lacs to traders. and received the cash 10000/- per day basis. Is It Section 269ST Violated or not.

    • R. M. Rao says:

      This transaction is under condition (b). So he can take cash upto Rs.199000/- on daily Rs.10000/-basis. The balance he has to take only on digital mode.

  10. jai kumar says:

    sirji there is a panic in the market what to do please advise us. we are in domestic money transfer business. co. like itz oxigen wallet smart shop i cash wallet and many more … these are the co. which has got ppi licenced from NPCI . now these co. has their own retailers and distributors, retailers collects money from customers( workers ) and distributors collects money from retailers and these money in to co. like itz oxigen wallet and i cash wallet . now for eg. lets say with average of 3000 rupees a no of 100 workers deposits money at retailers counter total 3 lakhs. in this retailers earn 1500 now npci asking not to deposit more than 199000 . in this situation what to do. ham apni dukaan band karle ya kya karen. becoz its worker wages. please guide us what to do.

    jai kumar
    7506098548

  11. Ekta sukheja says:

    as per my rationale of understanding banking transactions should be kept out of the purview of the section. As withdrawal from bank is merely a withdrawal of my own money which hitherto i would have kept to myself. I might be a construction firm and i might have to make payments to labour which may amount to lacs. The payment would be made to multiple people and not a single person. What will be the remedy in such cases.

  12. shashank garg says:

    I sold my second home for rs 120000 and the party is giving full payment in cash. if a deposit all the money in the bank on same date so it would be punishable offense?

    • Vivek Chiraniya says:

      Section 269SS does not allow to receive a sum of Rs. 20000 or more in cash in relation to transfer of an immovable property. You have already attracted a penalty u/s 271D for violation of Sec 269SS provisions.

    • R. M. Rao says:

      From your side, you can do that. But from buyer angle, he cannot pay more than Rs.10000/- in cash and the rest he has to make bank payments.

  13. Mehul Prajapati says:

    I have a five bank account. Can I withdraw cash less than two lacs rupees from my every account in one day means
    From one account is Rs. 190000 from second account Is Rs. 190000/ and third account?

  14. Ramakrishna says:

    bill amount is 3 lakh 2 lakh paid in different days
    and 1 lakh paid chq. it is applicable?

    • Pratik Anand says:

      payment should be below 2 lacs in cash. Payment of 2 lacs and above in cash will be hit by sec 269ST

  15. Ramakrishna says:

    sir your cell no. please

  16. Ramakrishna says:

    Examp., RK & Company Sales Mallika & Co, 3 Bills
    each bill amount 1 lakh so 3 bills amount 3lacks
    then Mallika & co., paid each bill 1 lakh paid in three times in different days so it is applicable this penality

    • Pratik Anand says:

      Section 269ST will not be applicable as long as the the bills do not belong to a single event/occasion. If 3 different bills are raised relating to a single event/occasion then also Sec 269ST will be applicable.

  17. Madhu Gupta says:

    Sir,
    I have current account in three diffrent bank , can I Withdraw 1.5 lakh each bank in singal day .

  18. Mayur says:

    I have a small vendor who buys goods worth rs 1000from me daily and pays in cash.. His total turnover for the year is around 3.5laks assuming rs 1000 daily. Will this section apply to him? Can I continue collecting cash from him? Assuming that every sale is a new contract can this section be interpreted differently?

    • Pratik Anand says:

      As long as the transactions are different and are not related to a single event/occasion and the total payment is not paid at once of Rs. 2 lacs or above. You will not be hit by sec 269ST.

      • Mayur says:

        Thanks. Will an agency arrangement for an year be construed as a single event/occasion.? Considering my case wherein I collect rs 1000 from my vendor daily for a sale of the same amount?

  19. VINOD MITTAL says:

    IF THE ONE BILL ISSUED FOR THREE LAKH, AND THE PAYMENT IS RECEIVED IN THREE DAYS EACH ONE LAKH PER DAY, IS SECTION 269ST VIOLATED.

  20. VINOD MITTAL says:

    KINDLY LET ME KNOW, THIS SECTION IS HIT, IF A TRADER SOLD THE GOODS ON DIFFERENT DATES SAY ONE LAKH EVERY DAY, FOR SEVEN DAYS, AND HE RECEIVES THE PAYMENT IN CASH LESS THAN RS, 10,000/-(TEN THOUSAND) ON DAILY BASIS. WHOLE OF THE PAYMENT IS RECEIVED IN CASH. IN SEVENTY DAYS.? KINDLY COMMENT

  21. tunir kejriwal says:

    Regarding banks?
    Cash withdrawal above 200000 from my own account will also be Penalised?

  22. Jyothikumar says:

    Cash transaction is banned above 2 lacs.
    Is cheque crossed ,demand draft ,are also not allowed?
    Then what is the mode of payment left.?

    • Pratik Anand says:

      You can pay by account payee cheque or account payee bank draft or by online payments methods such as NEFT/RTGS/ Online Banking.

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