FAQs on Section 269ST in light of recent CBDT notification dated 07.05.2021

Section 269ST relaxations announced in Covid 2.0 times especially for payment of medical bills of INR 2 lacs or more; vide Notification No. 56/2021-Income Tax Dated: 7th May, 2021 for a period of 2 months.

Penalty on receipt of an amount of Rs. 2 lakh or more in cash Section 269ST (as inserted by the Finance Act, 2017 with effect from 1/4/2017) provides that no person shall receive an amount of Rs. 2,00,000 or more —

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

(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 account payee bank draft or use of electronic clearing system through a bank account, or through such other electronic mode as may be prescribed.

However, the said restriction shall not apply to Government, any banking company, post office savings bank, co-operative bank or a person notified by the Central Government.

Section 271DA provides for levy of penalty on a person who receives a sum in contravention of the provisions of section 269ST. The penalty shall be equal to the amount of such receipt. However, the penalty shall not be levied if the person proves that there were good and sufficient reasons for such contravention.

Janya (a fictional character who is very inquisitive and questions everything)

Tanishi (a fictional character who has got great acumen and has all the answers)

QUESTION 1:

Janya : In case, different person draw cheques in the name of the respective hospital to help the patient, what would be the income tax implications.

Tanishi : Suppose A,B,C,D,E draw cheques of 50,000 each totalling Rs.2,50,000.00 in the name of the hospital but paid against the patients billing Id, then section 29ST won’t be attracted since cheques are given directly to discharge the hospital bills and would become personal expenses or drawings of the giver.

QUESTION 2:

Janya : In case, the different person make cash payment to the hospital to discharge the patients bill and patient is relieved on 30.03.2021, what will be the income tax implications.

Tanishi : Suppose, A,B,C,D,E make cash payment of Rs.50,000 each totaling Rs.2,50,000.00 and patient is discharged on 30.03.2021, then section 269ST will be attracted and penal provisions u/s 271DA come into play. The payment date of the bill is before 01.04.2021, hence section 269ST is attracted.

QUESTION 3:

Janya : Suppose, A,B,C,D,E make cash payment of Rs.50,000 each totaling Rs.2,50,000.00 and patient is discharged on 08.05.2021, what will be the income tax implications.

Tanishi : Section 269ST won’t be attracted since the payment is made on 08.05.2021  since Notification benefit can be claimed for 2 months between 01^st April and 31^st May 2021.

QUESTION 4:

Janya : In case, the relatives and/or friends make cheque payment of Rs.2,50,000.00 in the bank account of the patient first and then the amount is paid to the hospital, what will be the income tax implications.

Tanishi : In case A,B,C,D,E transfer 50,000 each to the bank account, section 269ST won’t be attracted since there is no cash involved; but taxability of gift under Section 56(2) need to be seen and might got attracted if the conditions of exempt gift are not fulfilled.

QUESTION 5:

Janya : In case the friends make payment to hospital for discharging patient on 08.05.2021 for heart surgery, what will be the income tax implications.

Tanishi : In case, A,B,C,D,E make payment of Rs.2,50,000.00 for discharge of patient on 08.05.2021, section 271DA penal provisions get attracted since the disease involved is non-covid and the notification covers only for Covid treatment of the patient.

QUESTION 6 :

Janya: In case any anonymous donor discharges the hospital bill of the patient and leaves the hospital as a philanthropic measure, what will be the income tax implications.

Tanishi: The notification dated 07.05.2021 comes with some riders wherein, the patient and payee need to submit pan or Aadhaar of both and relation need to be disclosed to the concerned hospital. In this case, wherein the Aadhaar of payee is not available, the conditions of the notification are not fulfilled and section 269ST and 271DA shall be attracted.

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