The Income Tax Act of 1961 plays a pivotal role in India’s taxation landscape. Among its myriad provisions, Sections 269SS, 269T, and 269ST stand out for their focus on minimizing cash transactions and curbing tax evasion. These sections demand specific reporting in the Tax Audit Report (Form 3CD) to ensure accountability. In this article, we will dissect these sections to understand their applicability, scope, penalties, and exclusions.
Section 269SS, 269ST and 269T of the Income Tax Act,1961 prohibits acceptance/repayment of loan, deposits etc otherwise than by an account payee cheque. These sections were introduced to curb the increasing cash transactions and to stop tax evasion.With the increase number of cash transactions by the taxpayer, the income tax department has introduced various provisions which account for such transactions and are required to be reported in the Tax Audit Report to ensure that the taxpayer does not give any false explanation for his unaccounted money. In this article, we shall understand the applicability of various sections and its reporting requirement in the Tax Audit Report (Form 3CD).
This section prohibits acceptance of any loan, deposit, or specified sum of ₹20,000 or more from any person other than through an account payee cheque, bank draft, or electronic clearing system. The penalty for violation is 100% of the sum taken or accepted, and it applies universally across various entities like individuals, firms, companies, trusts, and societies.
Section 269SS covers three scenarios:
This section focuses on prohibiting the repayment of any loan or deposit of ₹20,000 or more in cash. The penalty is equivalent to 100% of the amount repaid. It has similar applicability to Section 269SS but also includes branches of banking companies and co-operative societies.
This section prohibits the receipt of ₹2,00,000 or more in cash. The penalty for contravention is 100% of the cash received.
|Particulars||Section 269SS||Section 269T||Section 269ST|
|Introduction||It prohibit acceptance of any Loan, deposit or specified sum (advance or otherwise in relation to a transfer of any immovable property) of Rs. 20,000 or more from any other person otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system.||It prohibits Payment of any Loan or deposit or specified advance together with the interest thereon, whatever of Rs. 20,000 or more to any other person||It prohibits receipt of cash of Rs. 2,00,000 or more otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system.
Moreover this Section 269ST will not come into picture where Sec 269SS applicable.
|Penalty for Contravention||Violation shall attract penalty u/s 271D which is equivalent to 100% of the loan or deposit or specified sum so taken or accepted.||Violation shall attract penalty u/s 271E, be liable to pay, by way of penalty, a sum equal 100% of the loan or deposit or specified advance so repaid.||Violation of this Section will attract penalty u/s 271DA which is equivalent to 100% of the cash received.|
|Applicability||Applicable on all person i.e. Individual, HUF, firm, company, trust, society etc.||Applicable on all person i.e. Individual, HUF, firm, company, trust, society etc. Also, applicable on Branch of banking company or co-operative bank, or co-operative society etc.||Applicable on all person i.e. Individual, HUF, firm, company, trust, society etc.|
|Scope||It covers three different situations:
(i) Amount of loan/ deposit/ specified sum or aggregate of any such loan, deposit and specified sum is Rs. 20,000 or more.
(ii) Unpaid any Loan/deposit/ specified sum on the date of taking such loan /deposit/specified sum is Rs.20,000/- or more.
(iii) New Loan/deposit/specified sum + any Unpaid/Outstanding Loan/deposit/specified sum aggregate is Rs. 20,000 or more.
|It also covers three different situations. No person can repay any loan or deposit or specified advance in cash, if
(i)The amount of loan or deposit or specified advance together with interest exceeds Rs. 20,000 or more.
(ii) The amount of loan or deposit held by such person with the Branch of Banking co. or co-operative bank or Other company or Co-operative society or Firm or other person Loan or deposit In his name + Loan or deposit jointly with other person Aggregate of such loan or deposit + together with interest On the date of repayment is Rs. 20,000 or more
(iii) Aggregate of specified Advance taken by such person In his name + Jointly with other person On the date of repayment exceed Rs. 20,000 or more.
|It covers three different situations:
(i) Receipt of cash in aggregate from a person in a day (per person per day)
(iii) Receipt of cash in respect of transactions relating to one event or occasion from a person.
|Exclusions||The provisions of this section will not apply under the following circumstances:
(i) Where the loan/deposit/specifies sum is accepted by:
(a) the Government;
(b) any banking company, post office savings bank or co-operative bank;
(c) any corporation established by a Central, State or Provincial Act; (d) any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013)
(e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette:
(ii) Where the receiver/ payer both having agricultural income and neither of them has any income chargeable to tax.
(iii) Any Contribution of capital by partners into the partnership firm in the form of cash
(iv) Receipt of cash from relatives during emergencies where the intention of the person is not tax evasion.
|However, this provisions will not cover the following case as mentioned below:
(i)Where any individual, firm, AOP, BOI, company or society etc make repayment of any loan, or deposit or specified sum to the following parties, namely:
(b) any banking company, post office savings bank or co-operative bank
(c ) any corporation established by a Central, State or Provincial Act
(d) any Government company13 as defined in section 617 of the Companies Act, 1956 (1 of 1956);
(e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette.
|The provisions of this section will not apply for the following:
(a) the Government
(b) any banking company, post office savings bank or co-operative bank (c)Transactions of the nature referred to in Sec 269SS
(d) Such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.
Special Consideration for Tax Audit
Any loan, deposit or any specified sum accepted or paid during the year shall be reported in the Tax Audit Report in the relevant clauses. Clause 31 of the Tax Audit Report in Form 3CD requires the auditor to submit various information in respect of the above sections. Requirements of the clause is mentioned below:
Clause 31 (a)/ (b)
Particulars of each loan or deposit or specified sum in an amount exceeding the limit specified in Section 269SS taken or accepted during the previous year :—
1. name, address and permanent account number (if available with the assessee) of the lender or depositor;
2. amount of loan or deposit taken or accepted;
1. maximum amount outstanding in the account at any time during the previous year;
2. whether the loan or deposit was taken or accepted otherwise than by an account payee cheque or an account payee bank draft.
3. in case the loan or deposit was taken or accepted by cheque or bank draft, whether the same was taken or accepted by an account payee cheque or an account payee bank draft.
(ba) Particulars of each receipt in an amount exceeding the limit specified in section 269ST, in aggregate from a person in a day or in respect of a single transaction or in respect of transactions relating to one event or occasion from a person, during the previous year, where such receipt is otherwise than by a cheque or bank draft or use of electronic clearing system through a bank account:-
1. Name, address and Permanent Account Number or Aadhaar Number (if available with the assessee) of the payer;
2. Nature of transaction;
1. Date of receipt;
Clause 31 (c)/(d)/(e)
Particulars of each repayment of loan or deposit in an amount exceeding the limit specified in section 269T made during the previous year :—
Understanding Sections 269SS, 269T, and 269ST is crucial for compliance with the Income Tax Act, 1961. These sections not only aim to limit cash transactions but also encourage transparency, thereby preventing tax evasion. Being aware of their intricacies can save taxpayers from hefty penalties and legal complications.
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