Section 269ST of Income Tax Act, 1961

Introduction:-Section 269ST of Income Tax Act, 1961 restricts the cash transaction. It was introduced to do cashless transaction for avoid evasion of Taxation.

Lets we discuss about the Section in Details.

Sec 269ST prescribes that no person shall receive amount of two lakh or more–

1. In aggregate from a person in a single day;or

2. In respect of a single transaction; or

3. In respect of transaction 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.

In short a person cannot receive for a single transaction from other person amount of 2 Lakh or more in cash.

Exclusions from the scope of 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

Example:-

1. If one sells goods worth Rs 4,50,000 through three different bills of Rs.150,000 each to one person and accepts cash in 1 single day at different times then section 269ST(a) will get violated.

2. If one sells goods worth Rs 500,000 through a single bill to another person and receives cash of 2,50,000 on day 1 and another 2,50,000 on day 2 then section 269ST(b) will get violated.

3. X accepts an order of catering, decoration and tent for the marriage event of Y. He accepts cash of Rs.1,00,000 for catering Rs 1,50,000 for decoration and Rs.1,50,000 for tent work then section 269ST(c) will get violated even if cash is accepted on different dates. All the cash transactions relate to the same occasion- marriage of Y.

In all the three cases, section 269ST gets violated and penalty u/s 271DA is applicable.

Penal provision for violation of Sec 269ST of Income Tax Act,1961

The government has also introduced penalty provisions if Section 269ST is violated. If a person receives the amount in cash over the above specified limit of Rs.2 lakh, he is liable to pay a penalty equal to the amount received in cash. Thus, it is very important to ensure that you do not receive cash of Rs.2 lakh and above in a single transaction, aggregate from a person in a day, or in respect to transactions relating to one event or occasion from a person.