The document provides a comprehensive FAQ on the Income-tax Act provisions governing cash transactions, loan and deposit acceptance and repayment, prescribed electronic payment modes, and related penalties. It explains the scope, thresholds, exceptions, and consequences under Sections 40A(3), 269SS, 269ST, 269SU, and 269T, along with the corresponding penalties under Sections 271D, 271DA, and 271DB. The FAQ clarifies restrictions on accepting or repaying loans, deposits, and specified advances through non-prescribed modes, limits on cash receipts, mandatory electronic payment facilities for specified businesses, and disallowance of business expenditure for certain cash payments. It also specifies the threshold limits, exceptions for government, banking institutions, co-operative banks, notified entities, and agricultural transactions, as well as the enhanced threshold of ₹2 lakh for specified transactions involving Primary Agricultural Credit Societies (PACS) and Primary Co-operative Agricultural and Rural Development Banks (PCARD). Further, the document lists the prescribed electronic payment modes under Rule 6ABBA, including UPI, IMPS, NEFT, RTGS, credit cards, debit cards, and BHIM Aadhaar Pay, and clarifies that where a transaction is covered under Section 269SS, the provisions of Section 269ST shall not apply.
FAQs on Disallowance of cash expenses or limit on cash transactions
Q1. What is the provision of Section 269T?
Ans. Section 269T restricts a person from repayment of any loan, deposit, or any specified advance received by it otherwise than by an account payee cheque or account payee bank draft (drawn in the name of the person who made the loan, deposit or specified advance) or by use of electronic clearing system through a bank account or other electronic modes prescribed under Rule 6ABBA.
Q2. Which transactions are covered in the ambit of Section 269T?
Ans. Repayment in respect of the following transactions is covered under this provision:
- Any loan or deposit of money which is repayable after notice or repayable after a period and in case of a person other than company it includes loan or deposit of any nature; or
- Any sum of money in the nature of advance in relation to the transfer of immovable property, whether or not the transfer takes place.
Q3. What is the penalty for contravention of Section 269SU?
Ans. Where a person fails to provide the facility for accepting payment through prescribed electronic modes as required under this provision, he shall be liable for a penalty under Section 271DB of Rs. 5,000 for every day during which such failure continues.
Q4. Is there any exception where the provision of Section 269T shall not apply?
Ans. There is no restriction on repayment of any loan or deposit or specified advance taken or accepted from any of the following:
- Government;
- Any banking company, post office saving bank, or co-operative bank;
- Any corporation established by a Central, State, or Provincial Act;
- Any government company defined under section 2(45) of the Companies Act, 2013; or
- Any other notified institutions, associations, or body, or class of institutions, associations, or bodies.
Q5. What is the threshold limit for Section 269T?
Ans. This provision shall be attracted if the value of the covered transaction exceeds the following limit:
a. The amount of such loan or deposit or specified advance together with interest payable thereon is Rs. 20,000 or more;
b. The aggregate amount of the loans or deposits held either in own name or jointly with any other person on the date of such repayment, together with interest payable on such loans or deposits, is Rs. 20,000 or more; or
c. The aggregate amount of the specified advances received by such person either in his own name or jointly with any other person on the date of such repayment together with interest payable on such specified advances, is Rs. 20,000 or more.
However, if a deposit is paid by a Primary Agricultural Credit Society (PACS) or a Primary Co-Operative Agricultural and Rural Development Bank (PCARD) to its member or a loan is repaid to a PACS or a PCARD by its member, the threshold of Rs. 20,000 shall be enhanced to Rs. 2 lakhs (Refer Note 1)
Note 1: Inserted by the Finance Act, 2023 with effect from 01.04.2023.
Q6. Which payment modes are covered in ‘prescribed electronic modes’ for the provision of Sections 40A(3), 269SS, 269ST, 269SU, and 269T?
Ans. Prescribed electronic modes include-
a) Credit Card;
b) Debit Card;
c) Net Banking;
d) IMPS (Immediate Payment Service);
e) UPI (Unified Payment Interface);
f) RTGS (Real Time Gross Settlement);
g) NEFT (National Electronic Funds Transfer); and
h) BHIM (Bharat Interface for Money) Aadhaar Pay.
Q7. What is the provision of Section 40A(3)?
Ans. If the payment (or aggregate of payments) for an expenditure to a person in a day exceeds Rs. 10,000 and it is made by any mode other than account payee cheque or bank draft or electronic clearing system through a bank account or electronic modes prescribed in Rule 6ABBA, no deduction shall be allowed for such expenditure.
Q8. What is the limit if payment is made for plying, hiring, or leasing goods carriages?
Ans. Where payment is made for plying, hiring, or leasing goods carriages, the ceiling of Rs. 35,000 shall be considered instead of Rs. 10,000.
Q9. Whether payment made to a bank covered in this provision?
Ans. Payments made in a non-specified mode (i.e., cash, crossed cheque, bearer cheque, etc.) to the following institutions are not covered in this provision:
(a) RBI or any banking company;
(b) State Bank of India or any of its subsidiary banks;
(c) Co-op. banks or land mortgage banks;
(d) Primary Agricultural Credit Society or Primary Credit Society; and
(e) LIC
Q10. Is disallowance made under this provision for the payment made by way of book adjustment?
Ans. As per Rule 6DD(d), no disallowance shall be made where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee.
Q11. What is the provision of Section 269SS?
Ans. Section 269SS restricts a person (recipient) from taking or accepting any loan or deposit or any specified sum from any other person (depositor), otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or other electronic mode prescribed in Rule 6ABBA.
Q12. Whether Section 269SS apply if the recipient and depositor both have an agricultural income?
Ans. Section 269SS shall not apply if both recipient and depositor have an agriculture income and neither of them has any income chargeable to tax.
Q13. Which transactions are covered in the ambit of Section 269SS?
Ans. The following transactions are covered under this provision:
- Any loan or deposit of money; or
- Any sum of money receivable by way of advance or otherwise in relation to the transfer of immovable property, whether or not the transfer takes place.
Q14. What is the threshold limit for Section 269SS?
Ans. This provision shall be attracted if:-
1. The amount (or aggregate) of such loan or deposit or specified sum from a depositor is Rs. 20,000 or more; or
2. On the date of taking or accepting such loan or deposit or specified sum, the amount (or the aggregate) of any loan or deposit or specified sum taken or accepted earlier from the depositor remaining unpaid is Rs. 20,000 or more; or
3. The aggregate of the sum referred to in points (a) and (b) above is Rs. 20,000 or more.
However, if a deposit is accepted by a Primary Agricultural Credit Society (PACS) or a Primary Co-Operative Agricultural and Rural Development Bank (PCARD) from its member or a loan is taken from a PACS or a PCARD by its member, the threshold of Rs. 20,000 shall be enhanced to Rs. 2 lakhs (Refer Note 1).
Note 1: Inserted by the Finance Act, 2023 with effect from 01.04.2023.
Q15. What is the provision of Section 269ST?
Ans. Section 269ST restricts a person (recipient) from receiving an amount of Rs. 2 lakhs or more otherwise than by an account payee cheque or account payee bank draft or use of an electronic clearing system through a bank account or other electronic modes prescribed in Rule 6ABBA.
Q16. What is the penalty for contravention of Section 269SS?
Ans. Where a person takes or accepts any loan or deposit (or specified sum) in cash or in a mode which is in contravention of Section 269SS, he shall be liable for a penalty under Section 271D of a sum equal to the amount of the loan or deposit (or specified sum) so taken or accepted.
Q17. Is there any exception where the provision of Section 269SS shall not apply?
Ans. There is no restriction to take or accept any loan or deposit or specified sum in the impermissible mode from or by any of the following:
- Government;
- Any banking company, post office saving bank, or co-operative bank;
- Any corporation established by a Central, State, or Provincial Act;
- Any government company defined under section 2(45) of the Companies Act, 2013; or
- Any other notified institutions, associations, or body, or class of institutions, associations, or bodies.
Q18. Which transactions are covered in the ambit of Section 269ST?
Ans. This provision imposes restrictions in respect of the receipts of Rs. 2 lakhs or more:
a) In aggregate, from a person in a day; or
b) In respect of a single transaction; or
c) In respect of a transaction relating to one event or occasion from a person.
Q19. What is the penalty for contravention of Section 269ST?
Ans. Where a person receives the amount in contravention of this provision, he shall be liable for a penalty under Section 271DA of a sum equal to the amount of such receipts.
Q20. Is there any exception where the provision of Section 269ST shall not apply?
Ans. This provision shall not apply to the receipt by the following persons:
- Government;
- Any banking company, post office saving bank, or co-operative bank; or
- Any other notified persons, class of persons, or receipts.
Further, the provision of this section shall not apply to receipt by any person from any banking company, post office savings bank, or co-operative bank.
Q21. Which provision prevails if a transaction is covered in the provision of Section 269SS as well as Section 269ST?
Ans. Where a transaction is covered within the scope of Section 269SS, the provisions of Section 269ST shall not apply.
Q22. What is the provision of Section 269SU?
Ans. Section 269SU provides that where a person is carrying on a business and his total sales, turnover, or gross receipts during the immediately preceding previous year exceeds Rs. 50 crores, it shall be mandatory for him to provide a facility to accept the payment through the following electronic modes:
a) Debit card powered by RuPay;
b) Unified Payments Interface (UPI) (BHIM-UPI); and
c) Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code).
Q23. What is the penalty for contravention of Section 269SU?
Ans. Where a person fails to provide the facility for accepting payment through prescribed electronic modes as required under this provision, he shall be liable for a penalty under Section 271DB of Rs. 5,000 for every day during which such failure continues.
Q24. Is there any exception where the provision of Section 269SU shall not apply?
Ans. The provision of this section shall not apply to a person having only B2B transactions (i.e., no transaction with retail customer/consumer) subject to the condition that at least 95% of the aggregate of all amounts received during the previous year, including the amount received for sales, turnover or gross receipts, is by any mode other than cash.
(Republished with Amendments – Source: Income Tax India Website)
