CA Lakesh Kumar

CA Lakesh Kumar

Limit/Restriction on Cash transaction U/s 269ST of Income Tax Act.1961

Cash transactions in the economy mainly responsible to increase or promote the black money circulation in their respective fields/Areas.  With an objective to control the black money circulation and promote the digital economy in the country the Government has introduced a section 269ST and 271DA w.e.f. 1st April, 2017.

Applicability- According to provision of Section 269ST– 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.

Exceptions in respect to Section 269ST-

Provision of Section 269ST shall not apply any of the following if receipt by-

a. Government

b. Any Banking Company

c. Post office

d. Co-operative Bank

e. Transactions of nature referred to in section 269SS

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

Ministry of Finance released notification of 5th April, 2017 specifying the exception addition to the exceptions specified in Section 269ST;

a. Clarified that restriction imposed by U/s 269ST shall not apply if person receive cash 2 lakhs or more from-

a. Any banking company; or

b. Post office savings bank; or

c. Co-operative bank.

Further Ministry of Finance released notification of 03rd July, 2017 specifying the exception addition to the exception specified in Section 269ST. These exceptions are;

a. receipt by a business correspondent on behalf of a banking company or co-operative bank, in accordance with the guidelines issued by the Reserve Bank of India;

b. receipt by a white label automated teller machine operator from retail outlet sources on behalf of a banking company or co-operative bank, subject to  the authorization issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007

c. receipt from an agent by an issuer of pre-paid payment instruments, subject to the authorization issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007 (51 of 2007);

d. receipt by a company or institution issuing credit cards against bills raised in respect of one or more credit cards;

e. receipt which is not includible in the total income under clause (17A) of section 10 of the Income-tax Act, 1961.

Consequence if not comply with Section 269ST ;

  • If any person not comply with section 269ST then they have to bear penalty specified U/s 271DA.
  • They shall be liable to pay an amount as penalty equal to such amount receipt
  • However there is a exception to section 271DA; According to section 271DA if person proves that there were good and sufficient reasons for contravention of section 269ST then no person shall be liable.

Example-

A Seller Mr. Roshan sold goods to Mr. Manoj against the following invoices:

Date Invoice No Vaule
21/01/2019 Inv.No-1 Rs. 4,50,000/-
22/01/2019 Inv.No-2 Rs. 2,00,000/-
21/02/2019 Inv.No-3 Rs. 5,00,000/-
22/02/2019 Inv.No-4 Rs. 3,00,000/-

Explanation:

  • If Roshan received cash on dated 25/01/2019 of Rs. 3,00,000/- against Inv. No.-1, then there is contravention of section because a person shall not accept of Rs. 2 lakh or more against a single transaction.
  • If Roshan received cash on dated 25/01/19 of Rs. 1,50,000/- against Inv. No.-1 andRs. 60,000/- against invoice no.-2 then it is contravene of section 269ST because person can not accept of Rs. 2 lakhs or more in a single day from a  person.
  • If Roshan received cash of Rs. 2,50,000/- and rest money through A/c Payee Chq. on dated 25/02/2019 from Manoj against Inv. No-3 & 4, then it is also contravention because he received more than Rs. 2 Lakhs relating to single event/Occasion.

However let suppose if invoice No-3 & 4 issued in favor of deferent person concerning to the same event/occasion, then maximum cash limit calculated separately for single person even if received amount relating to the same event/occasion.

Other Points ;

  • I have received many queries from people regarding this section, some people think that they should have maximum cash limitin books of Rs. 2 lakh is for a year or for a day. However this section does not deals with the maximum cash limit.
  • This section only restrict to receive cash of Rs. 2,00,000 or more.
  • This section applicable to all persons whether it is a business or an Individual.
  • Before introduction of this section there was no restriction on the receiver to accept cash however restriction on the payer U/s 40A(3) that a person shall not pay more than of Rs. 10,000/-. So earlier it was easy to manipulate books to some extent.
  • After introduction of this section even an individual cannot receive gift in cash of Rs. 2,00,000/ or more.
  • This Section not applicable on the transaction covered U/s 269SS.

( Author can be reached at E-Mail-: lakeshkr@gmail.com)

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5 Comments

  1. Nandwani says:

    If a person takes a loan from NBFC of amount Rs:202000. The borrower also wants to take medical insurance from the same entity So, after deducting the insurance amount from the loan amount. Can NBFC give the balance amount which is less than Rs: 200000 in cash to the borrower?

  2. ASISH MOHAPATRA says:

    How about the sale to an Agriculturist more than 2 lakh. Can we seek any special exemption? For Example : In case of Tractor sale to Agriculturist, mostly they dont have a bank account. They are ready to pay by cash.

  3. Muneer Ahamed says:

    How about the sale to an Agriculturist more than 2 lakh. Can we seek any special exemption? For Example : In case of Tractor sale to Agriculturist, mostly they dont have a bank account. They are ready to pay by cash.

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