Article covers Cash Transactions provisions (Section 269SS, 269T, 269ST, 43), Reportable Transaction provisions (Section 285BA, Rule 114E) and Transaction on which Tax has to be collected at Source (TCS) (Section 206C)
In Indian economy, cash transactions has always played a major role and has been a reason for black money. Income Tax Department uncovers the unaccounted cash during raids. Earlier, people used to evade taxes by showing unaccounted cash as receipts of loans/advances/deposits from their friends and relatives and also used to show cash transaction payments as repayment by cash to friends/relatives.
The Government over a period of time has initiated various measures to curb cash transactions and boost digital payments. In addition to Cash Transactions, various other transactions in the nature of Deposits in Bank Accounts, Investments in Shares, Mutual Funds, Debentures, etc are to be reported to Income Tax Department, if they exceed certain limits.
We have divided the article into 3 Sections for ease of understanding and comprehending all such transactions which help in reducing black money by either curbing cash transactions over certain limit or by reporting certain transactions which may help in providing information to the Tax department regarding potential tax evasion.
1. Cash Transactions provisions (Section 269SS, 269T, 269ST, 43)
2. Reportable Transaction provisions (Section 285BA, Rule 114E)
3. Transaction on which Tax has to be collected at Source (TCS) (Section 206C)
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 –
In short, a person cannot accept any loan or deposit of Rs. 20,000 or more from another person other than through Banking channels.
Exceptions to Section 269SS:
The provisions of this section shall not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by,—
Penalty on contravention of Section 269SS (Section 271D):
Joint Commissioner shall impose penalty of 100% of the amount of loans / deposits / specified sum so taken.
A person cannot repay any 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 –
In short, a person cannot repay the loan or deposit in cash, if the amount is Rs. 20,000 or more.
Exceptions to Section 269T:
The provisions of this section shall not apply to repayment of any loan or deposit or specified advance taken or accepted from—
Penalty on contravention of Section 269T (Section 271E):
Joint Commissioner shall impose penalty of 100% of the amount of loans / deposits / specified sum so repaid.
Section 269ST of Income Tax Act provides that no person can receive an amount of Rs 2 Lakhs or more in cash:
It has been clarified vide Circular No 22/2017, dated 3.7.2017 that in respect of receipt in the nature of repayment of loan by NBFCs or Housing Finance Companies (HFCs), the receipt of one instalment of loan repayment in respect of a loan shall constitute a ‘single transaction’ as specified in clause (b) of section 269ST of the Act and all the instalments paid for a loan shall not be aggregated for the purposes of determining applicability of the provisions section 269ST.
Further vide Circular No 27/2017, dated 3.11.2017, any cash sale of an amount of Rs.2 lakh or more by a cultivator of agricultural produce is prohibited under section 269ST of the Act.
Provisions of Section 269ST are not applicable, when cash of more than Rs.2 lakhs is received from following person:
Joint Commissioner shall impose a penalty of 100% of the amount of such receipts, unless the person proves that there were good and sufficient reasons for the contravention.
For the purpose of determining Profits and Gains from Business or Profession, where any person incurs any expenditure for acquisition of any asset or part thereof in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account, exceeds ten thousand rupees, such expenditure shall be ignored for the purposes of determination of actual cost.
As per section 40A(3), where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, exceeds Rs 10000/-, no deduction shall be allowed in respect of such expenditure while computing Profits and Gains from Business/Profession.
Section 40A(3A) further provides (that in case an allowance is made in the assessment for any year on the basis of incurred liability, but in the subsequent year or years, assessee makes a payment exceeding Rs 10000/-in a day, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, in respect of such liability, then the payment so made shall be deemed to be the Profit of the year in which such payment is made.
Certain exceptions have been provided wrt to the above disallowance, which is not covered in this article
With an objective to curb black money and widen tax base, apart from above initiatives, the Government took one more initiative which was to cast an obligation on government agencies and other authorities who are a valuable and reliable source of information, to report high-value transactions.
Such specified persons were required to submit ‘Annual Information Return(AIR)’ introduced in 2003 with respect to specified financial transactions under Section 285BA.
Later, Finance Act 2014 replaced Section 285BA and renamed it as ‘Obligation to furnish Statement of Financial Transaction (SFT) or reportable account’ to widen the scope of specified persons and to introduce various other provisions.
SFT is a report of specified financial transactions by specified persons including prescribed reporting financial institution. Such specified persons who register, maintain or record such specified financial transaction [and details to be reported by financial institutions in respect of each reportable account (these are for reporting persons who are non-resident /foreign entities or persons – Not covered in this article)]are under a mandate to submit SFT and to the income tax authority or such other specified authority or agency.
Financial transaction specifically required to be reported under Section 285BA are as follows:
The ‘specified transactions’ prescribed by the Central Board of Direc Taxes under Rule 114E of the Income Tax Rules are as hereunder:
|SI No||Nature of transaction to be reported||Monetary threshold of transaction||Specified person required to submit SFT|
|1||Cash payment purchase of bank drafts or pay orders or banker’s cheque
Cash payments for purchase of pre-paid instruments issued by Reserve Bank of India
Cash deposits in one or more current account of a person
Cash withdrawals from one or more current account of a person
|Aggregating to Rs 10 lakh or more in a FY
Aggregating to Rs 10 lakh or more during the FY
Aggregating to Rs 50 lakh or more in a FY
Aggregating to Rs 50 lakh or more in a FY
|A banking company or Co-operative bank to which Banking Regulation applies|
|2||Cash deposits in one or more accounts other than a current account and time deposit of a person||Aggregating to Rs 10 lakh or more in a FY||A banking company or Co-operative bank to which Banking Regulation applies
Post-Master General of post office
|3||One or more time deposits (other than renewed time deposit of another time deposit) of a person||Aggregating to Rs 10 lakh or more in a FY||A banking company or Co-operative bank to which Banking Regulation applies
Post-Master General of post office
Nidhi Company as per Section 406 of the Companies Act, 2013
NBFC – Non banking financial company holding certificate of registration under RBI Act to hold or accept deposit from public
|4||Credit card payments made by any person either in cash or by any other mode in a FY.||Aggregating to Rs 1 lakh or more in cash or Rs 10 lakh or more by any other mode in a FY||A banking company or Co-operative bank to which Banking Regulation applies or
any other company or institution issuing credit card
|5||Receipt from any person for acquiring bonds or debentures issued by the company or institution (other than renewal)||Aggregating to Rs 10 lakh or more in a FY||A company or institution issuing bonds or debentures|
|6||Receipt from any person for acquiring shares (including share application money) issued by the company||Aggregating to Rs 10 lakh or more in a FY||A company issuing shares|
|7||Buyback of shares from any person (other than the shares bought in the open market)||Aggregating to Rs 10 lakh or more in a FY||Listed company purchasing its own securities under section 68 of the Companies Act, 2013|
|8||Receipt from any person for acquiring units of one or more schemes of a Mutual Fund (other than transfer from one scheme to another)||Aggregating to Rs 10 lakh or more in a FY||A trustee of a Mutual Fund or any such other person authorised to manage the affairs of the Mutual Fund|
|9||Receipt from any person for sale of foreign currency including any credit of such currency to foreign exchange card or expense in such currency through a debit or credit card or through issue of travellers cheque or draft or any other instrument||Aggregating to Rs 10 lakh or more during a FY||Authorised person as referred to in Section 2(c) of the Foreign Exchange Management Act, 1999|
|10||Purchase or sale of immovable property||Transaction value or valuation of stamp duty authority referred in Section 50C for an amount of Rs 30 lakhs or more.||Inspector-General appointed under section 3 of the Registration Act, 1908 or Registrar or Sub-Registrar appointed under section 6 of that Act.|
|11||Cash receipt for sale, by any person, of goods or services of any nature (other than those specified at Sl. Nos. 1 to 10)||Exceeding Rs 2 lakh||Any person who is liable for audit under section 44AB of the Act|
|12||Cash deposits during the period 09thNovember, 2016 to 30th December, 2016||Aggregating to Rs 12,50,000 or more in one or more current account of a person or Rs 2,50,000 or more in one or more account (other than current account) of a person||A banking company or Co-operative bank to which Banking Regulation applies
Post Master General of post office
|13||Cash deposits during the period 1st of April, 2016 to 9th November, 2016 in respect of accounts that are reportable under Sl.No.12.||A banking company or Co-operative bank to which Banking Regulation applies
Post Master General of post office
From the above monetary threshold for specified financial transaction, except for transaction specified in SNo 10 and 11, aggregation is required to analyze if monetary threshold is being crossed. While aggregating the amount, the following shall be noted:
Form and Due Date of Furnishing SFT:
SFT in Form 61A shall be submitted by the ‘Specified Persons’ on or before 31 May of the Financial Year, immediately following the Financial Year in which the transaction is recorded or registered.
Tax collected at source (TCS) is the tax payable by a seller which he collects from the buyer at the time of sale. Section 206C of the Income-tax act governs the goods on which the seller has to collect tax from the purchasers.
When the below-mentioned goods are utilized for the purpose of manufacturing, processing, or producing things, the taxes are not payable. If the same goods are utilized for trading purposes then tax is payable. The tax payable is collected by the seller at the point of sale.
The rate of TCS is different for goods specified under different categories :
|Type of Goods||Rate|
|Liquor of alcoholic nature, made for consumption by humans||1%|
|Timber wood under a forest leased||2.5%|
|Timber wood by any other mode than forest leased||2.5%|
|A forest produce other than Tendu leaves and timber||2.5%|
|Minerals like lignite, coal and iron ore||1%|
|Purchase of Motor vehicle exceeding Rs. 10 Lakhs||1%|
|Parking lot, Toll Plaza||1%|
|Mining and Quarrying||2%|
TCS Payment and Return Filing Due Dates
|Collection Month||Due Date for Payment||Quarter Ending||Due Date for TCS Return (From 27EQ)|
|April||7th May||June||15th July|
|July||7th August||September||15th October|
|October||7th November||December||15th January|
|January||7th February||March||15th May|
Indian Government has taken many steps in direction of curbing Black Money. Besides demonetization, Enactment of the Benami Transactions (Prohibition) Amendment Act, 2016, Launching of ‘Operation Clean Money’ on 31st January 2017 , amending the Prevention of Money-laundering Act, 2002 through the Finance Act, 2015, Government has also been making stringent Income Tax provisions as enumerated above to restrict cash transactions and curb tax evasion.