Sections 269SS and 269T have been discussed in this article and this deals with cash payment and repayment of loans and deposits. Both the sections were introduced to curb the black money. Tax evasion is one of the serious problems in India causing economic disparities. False cash transactions give birth to unaccounted money which in turn increases tax evasion.
Income Tax Authorities uncover hidden and unaccounted cash during raids. Previously, the culprit would escape by saying that he received the cash as loan or deposit from friends or relatives.
Also, the persons with an aim of tax evasion would do false transactions showing payment and repayment of loans and deposits in cash.
To curb the increasing cash transactions which are leading to accumulation of black money, 269SS and 269T were introduced which restricts these cash payments.
2. What is Section 269SS?
A person cannot accept loan or deposit or any other specified sum (specified sum here refers to an advance or otherwise, in relation to the transfer of any immovable property) from another person otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if –
3. Exceptions to 269SS
i. Any loan or deposit or specified sum “taken or accepted from” or “taken or accepted by” the following entities –
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. Any institution, association or body or class of institutions, associations or bodies notified in Official Gazette
Thus, if any person accepts any loan or deposit or specified sum from the above-mentioned entities, or the entities accept any loan or deposit or specified sum from any person, provisions of 269SS will not apply.
ii. A person earning only agriculture income accepts loan or deposit from another person also earning only agriculture income
iii. Receiving cash from relative during emergencies. Here intention should not be to evade the taxes.
iv. Partners contributing cash capital into partnership firm
100% of the loan or deposit amount will be the quantum of penalty that can be levied by the assessing officer.
Section 269T prohibits any person to repay the loan or deposit or specified sum otherwise than by an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, if –
a. Amount of loan or deposit, including interest amount, is Rs. 20,000 or more, or
b. The aggregate amount of loans or deposits, including the interest amount, held by such person in his own name, or jointly with any person, is Rs. 20,000 or more.
In nutshell, a person cannot repay the loan or deposit in cash, if the amount is Rs. 20,000 or more.
A person paying Rs. 20,000 or more towards repayment of loan or deposit does not have to comply with 269T if he pays to the following parties –
100% of the loan or deposit amount will be the penalty leviable by the assessing officer.
In clause 31 of Form 3CD, the tax auditor has to report the transactions that have been hit by the provisions of Sections 269SS and 269T . Both the parties (payer and receiver) have to report the transactions. Clause 31 of Form 3CD is where these need to be reported.