Measures taken to discourage Cash Transactions and to promote Digital Economy by CBDT

Introduction:-

a) Sections 269SS and 269T which deals with cash payment and repayment of loans and deposits.

b) Both the sections were introduced to curb the black money. Tax evasion is one of the serious problems in India causing economic disparities.

c) False cash transactions give birth to unaccounted money which in turn increases tax evasion.

Mode of taking or Accepting certain loans deposits and specified sum {Sec.269SS of I.T Act 1961}:-

A. Applicability:-

Applicable to All Assesses whether subjected to Tax Audit u/s. 44AB or not.

B. Type of Transaction:-

No person shall take or accept from any other person (herein referred to as the depositor) any loan or deposit or any specified sum[1] 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 in Rule 6ABBA[2]] if:-

a) The amount of such loan or deposit or specified sum or the aggregate amount of such loan deposit and specified sum; or

b) On the date of taking or accepting such loan or deposit or specified sum any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not) the amount or the aggregate amount remaining unpaid; or

c) Amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b)

Is Rs.20000/- or more.

c) Exclusion:-

Provided further that the provisions of this section shall not apply to any loan or deposit or specified sum where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted are both having agricultural income and neither of them has any income chargeable to tax under this Act.

D. Penalty:-

Penalty equal to the Loan or Deposit taken or accepted U/s. 271D imposable by JCIT.

Mode of Repayment of certain loans or deposits {Sec.269T of I.T Act 1961}:-

A. Applicability:-

Repayment of any Loan or Deposit by:

i. Any company including Banking accompany and its branches;

ii. Co-operative banks and its branches;

iii. Co-operative society;

iv. Firm or other person.

B. Type of Transaction:-

No branch of a banking company or a co-operative bank and no other company or co-operative society and no firm or other person shall repay any loan or deposit made with it 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 has made the loan or deposit or paid the specified advance or by use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed in Rule 6ABBA[3]] if:-

a) The amount of the loan or deposit or specified advance together with the interest if any payable thereon or

b) The aggregate amount of the loans or deposits held by such person with the branch of the banking company or co-operative bank or as the case may be the other company or co-operative society or the firm or other person either in his own name or jointly with any other person on the date of such repayment together with the interest if any payable on such loans or deposits 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 the interest if any payable on such specified advances is Rs.20000/- or more.

C. Exclusion:-

Provided that where the repayment is by a branch of a banking company or co-operative bank such repayment may also be made by crediting the amount of such loan or deposit to the savings bank account or the current account (if any) with such branch of the person to whom such loan or deposit has to be repaid.

D. Penalty:-

Penalty equal to the Loan or Deposit repaid U/s.271E imposable by JCIT.

Common Provisions relating to Sec. 269SS & Sec. 269T:-

A. Provided that the provisions of these section shall not apply to:-

i. Government;

ii. Any banking company post office savings bank or co-operative bank;

iii. Any corporation established by a Central State or Provincial Act;

iv. Any Government company as defined in clause (45) of section 2 of the Companies Act 2013 (18 of 2013);

v. 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:

B. Reporting Provisions:-

i. 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.

ii. Both the parties (payer and receiver) have to report these transactions in Clause 31 of Form 3CD.

Mode of undertaking transactions {Sec. 269ST of I.T Act 1961}:-

Mode of undertaking transactions

No person shall receive an amount of two lakh rupees or more otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed in Rule 6ABBA[4]].

Penalty:-

Penalty for failure to comply with the provisions of Sec. 269ST = Sum equal to the amount of such receipt u/s. 271DA.

Exceptions:-

Provided that the provisions of this section shall not apply to:-

I. Any receipt by:

i. Government;

ii. Any banking company post office savings bank or co-operative bank;

II. Transactions of the nature referred to in section 269SS;

III. Receipt (Cash Withdrawal) by any person from a Bank, Co-operative bank or a Post office savings bank.

IV. Receipt by a business correspondent on behalf of a Banking company or a Co-operative bank.

V. Receipt by a white labelled Automated teller machine operator from retail outlet sources on behalf of a Banking company or a Co-operative bank.

VI. Receipt by a company or an institution issuing credit cards against bills raised in respect of one or more credit cards.

VII. Receipt which is not includible in the total income u/s. 10 (17A).

Examples relating to Sec.269ST:-

1. If one party sells goods to another of Rs.300000 through different bills and cash is received in a day of Rs.300000 then section 269ST is violated and penalty under section 271DA of Rs.300000 is imposed.

2. If one party sells goods to another of Rs.3 lakh through a single bill and cash is received of Rs.220000 on different days then section 269ST is violated and penalty under section 271DA of Rs.220000 is imposed.

3. If one party sells goods to another of Rs.3.5 lakhs through two bills of Rs.1.75 lakh each and cash is received on different days in respect of each bill then section 269ST is not violated.

Reporting Provisions:-

In clause 31 of Form 3CD, the tax auditor has to report the transactions that have been hit by the provision of Sections 269ST.

Further Measures by CBDT:-

Earlier, the Union Budget 2019 has introduced Section 194N for deduction of tax at source (TDS) @ 2% on cash withdrawals exceeding Rs.1 Crore to discourage cash payments and to promote the digital economy.

Budget 2020 has further reduced the threshold limit for TDS to Rs.20 lakh for taxpayers who have not filed their income tax returns for past three years. Such taxpayers withdrawing cash in excess of Rs.20 lakh have to pay 2% as TDS. 

[1] Specified sum means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.

[2] Rule 6ABBA-Debit/Credit Cards; Net Banking; IMPS; UPI; RTGS; NEFT; BHIM

[3] Rule 6ABBA-Debit/Credit Cards; Net Banking; IMPS; UPI; RTGS; NEFT; BHIM

[4] Rule 6ABBA-Debit/Credit Cards; Net Banking; IMPS; UPI; RTGS; NEFT; BHIM

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3 Comments

  1. Kollipara sundaraiah says:

    Sir,
    One of new small I.t. assess sales turnover f.y.2018-2019 rs.25 lacs
    sales turnover f.y.2019-2020 rs.32 lacs
    Assess two years I.t. returns filed.
    Question:
    Assess How much amount capital and cash on hand introduced opening balance(minimum and maximum) as on 01-04-2018 shown in I.t.returns under I.t. act.

  2. Kollipara sundaraiah says:

    One of I.t. Assess(son) cash mode gift received from mother Rs.1,90,000/-* 3 times three different dates total rs.5,70,000/- one finicial year accepted in I.t. act.
    1.Assess violation of sec 269 St provision penalty applicable.
    2.Gift amount shown in I.t. returns compulsory

    1. Santhosh Gupta says:

      Sir,
      As you are saying that these are done in 3 different days but no information regarding as to whether it is related to a single transaction or not
      I’m assuming that those are not relating to single Occassion or Transaction it was exempted u/s 56(2)(x) as it was received from mother and no penalty will be leviable u/s.271DA as each transaction does not exceed 200000/-
      Gifts are shown under the head INCOME FROM OTHER SOURCES and also these gifts are exempted one,it is recommended to declare them in the Return of Income.

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