As we all are aware of Section 269ST which was introduced by finance act, 2017 in Income tax act, 1961 by the central government in order to curb the tax evasion, regulation and circulation of Black money. This article will cover the detailed analysis of the said section alongwith some practical examples.
Page Contents
- 1. Basic Understanding of Section 269ST
- 2. What does Section 269ST say?
- 3. Non Applicability of Section 269ST
- 4. Penalty Under Section 271DA:
- 5. Practical examples on Section 269ST & Rs. 2 Lakh Cash Transaction Limit
- 6. Other Important Points on Section 269ST
- 7. Restriction on Capital Expenditure for Business in Cash above Rs. 10000/- [Section 43(1) and Section 32] :
- 8. Reduction in the limit of Cash Payment to Rs. 10000/- in a Day [Section 40A(3) & 40A(3A) of the Income Tax Act, 1961:
1. Basic Understanding of Section 269ST
As per Section 269ST, any person who enters into a transaction of Rs 2 Lakh or above in cash, will be liable to a penalty of an amount equivalent to the amount of transaction.
For example : If you buy an expensive watch for cash worth Rs 7 Lakh, it is the shopkeeper who will have to pay the tax (penalty) of Rs 7 Lakh. So, here the tax rate is 100%.
Though this new section on Cash Transaction limit sounds simple, we need to go through it in details, as I believe that this may have quite an impact on our daily financial lives.
2. What does Section 269ST say?
With effective from 1st April, 2017, no person shall receive an amount of Rs 2 Lakh 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.
The new Cash transaction limit is not applicable, if a person receives the amount through an Account Payee Cheque (or) an Account Payee Bank Draft (or) through use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed.
3. Non Applicability of Section 269ST
(i) any receipt by—
(a) Government;
(b) any banking company, post office savings bank or co-operative bank;
(ii) transactions of the nature referred to in section 269SS;
(iii) such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.
4. Penalty Under Section 271DA:
Kindly note that Penalty u/s 271DA will be imposed on a person who receives a sum of Rs 2 Lakh and above in cash. The extent of penalty will be a sum equal to the amount of such receipt. The said penalty shall however not be levied if the person proves that there were good and sufficient reasons for such contravention. Further please note that this penalty shall be imposed by Joint Commissioner.
5. Practical examples on Section 269ST & Rs. 2 Lakh Cash Transaction Limit
A. Single Person: Cash Receipt of Rs 2 lakh or more, from a single person in a dayis not allowed even if the amount has been paid through multiple transactions during the day which are below Rs 2 lakh.
For example : Mr Modi buys a gold chain worth Rs 2 Lakh and pays the amount by cash to Mr Rahul on a single day in 4 equal installments of Rs 50,000 each. As Mr Rahul accepted cash worth Rs 2 Lakh from a single person and in a single day, section 269ST is applicable in this case. Mr Rahul has to pay a penalty of Rs 2 Lakh.
B. Single Transaction: Cash receipts of Rs 2 Lakh or more which are related to a single transaction are prohibited.
For example : Mr Kejriwal goes through a medical surgery and the hospital charges him a bill of Rs 4 Lakh. Kejriwal clears the bill in 4 installments of Rs 1 Lakh each on four different dates. Here, the cash receipts got by hospital are less than Rs 2 Lakh and have been received on different dates.
Whether this transaction violates section 269ST? – Yes. Hospital has to pay the penalty. Because, they received the payments with respect to single bill / transaction. So, splitting of payments over several days is prohibited.
C. Single Event / Occasion: Cash transactions or cash receipts related to a single event or occasion, can not be more than Rs 2 Lakh.
For example : Nagachaitanya gets married to Samantha. On their wedding occasion, their relatives gifted Cash amount worth Rs 10 Lakh on different dates. Even if we assume that each person has gifted cash worth less than Rs 2 Lakh, are these receipts come under the purview of Section 269ST? Is penalty applicable?
Yes, penalty can be levied. Here, marriage is a ‘single occasion’ and cash gifts worth Rs 2 Lakh or more can not be received from relatives and other persons.
6. Other Important Points on Section 269ST
- Based on my interpretation of Section 269ST, payment modes like bearer cheque and self-cheque will also be considered on par with Cash based transactions only.
- It has been clearly stated that penalty (if any) is chargeable to an individual who violates section 269ST, even if you do not have PAN and/or is not a tax assessee.
- The restriction of receipt of money in Cash of Rs 2 Lakh or above in cash is applicable irrespective of whether it is for personal / business purpose, capital or revenue in nature, tax-free or taxable income.
- Kindly note that the payer of money is not liable to pay any penalty, it is the receiver of cash who has to bear the penalty u/s 271DA .
- Donations in cash exceeding Rs 2,000 are not permitted (Donations can be claimed u/s 80G)
- Premiums on Health insurance policies paid in cash can not be claimed u/s 80D
- Loans or Deposits can not be repaid in cash in excess of Rs 20,000 or more
- Payment of above Rs 10,000 per person, can not be made for any business payment towards any expenses (or) purchase of capital asset.
- One should not accept a loan or deposit or sale consideration of immovable assets in cash in excess of Rs. 20,000.
7. Restriction on Capital Expenditure for Business in Cash above Rs. 10000/- [Section 43(1) and Section 32] :
- Where an assessee incurs any expenditure for acquisition of a depreciable asset in respect of which a payment (or aggregate of payment made to a person in a day), otherwise than by an account payees cheque/ draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, exceeds Rs. 10000/-, such a payment shall not be eligible for normal/ additional depreciation under section 32.
8. Reduction in the limit of Cash Payment to Rs. 10000/- in a Day [Section 40A(3) & 40A(3A) of the Income Tax Act, 1961:
- The monetary limit on revenue expenditure in cash has been reduced from Rs. 20,000 to Rs.10,000(there is no change in the monetary limit pertaining to cash payment upto Rs. 35000/- to Transport Contractors). Few exceptions are also provided in Rule 6DD of the Income Tax Rules. Consequently, any expenditure in respect of which payment (or aggregate of payment made to a person in a day), otherwise than by an account payee cheque/ draft/ use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, exceeds Rs. 10000/-, no deduction shall be allowed in respect of such payment under section 30 to 37 of Income Tax Act, 1961.
(Republished with Amendment)
Author Bio
Hi Sir,
You have mentioned that a person cannot receive gifts in cash in excess of 10 lakhs on the occasion of Marriage. However, as per 56(2)vii cash gift of any amount on the occassion of marriage is exempt
Dear Sir,
The explanation under item 5(C) is not understood.
Please clarify the following
1. How gift is considered as event transaction. Is there is no more Gift and applicable rules applicable.
2. Gift is received from different persons/close relatives- how it is clubbed
My son received 10,500/= in cash as an annual FD interest from a reputed Co-operative Credit Society. He was repeatedly assured that there was no violation of any IT rules. Is it true ? If not, any remedy ?
I am in a business providing professional services in the nature of forensic nature. The outcome of the services offered by me have strictly two possiblities one that the report goes in the favour of the customer and second the report does not go in favour of the customer. Here the customers who avail of my services are unknown and in the past they have not paid me my dues in case the reports do not go in their favour. So I have started collecting cash from some individuals whom i feel may not pay me. Sometimes the amounts are in the range of Rs.50000/-. I do charge them GST as I am registered under GST and also pay my GST returns regularly. Also this entry is reflected in my books of accounts as i have made a cash bill of Rs.50000/- So am i liable for penalty in such a case.
Sir, Good Article. But I doubt whether this example is correct:
Nagachaitanya gets married to Samantha. On their wedding occasion, their relatives gifted Cash amount worth Rs 10 Lakh on different dates. Even if we assume that each person has gifted cash worth less than Rs 2 Lakh, are these receipts come under the purview of Section 269ST? Is penalty applicable?
Yes, penalty can be levied. Here, marriage is a ‘single occasion’ and cash gifts worth Rs 2 Lakh or more can not be received from relatives and other persons
Because, the words used in the section is “in respect of transactions relating to one event or occasion FROM A PERSON”
Regarding section 269ST do the law mean that i will print my marriage invitation card requesting my guests please dont give cash gift what so ever is the amount. Because I will pay penalty if it exceeds Rs. 200000 in total. Pls. Comment.
Rs.800000 Value Goods, Sold to Debtors. But Full Payment Received Cash Only. Now How to Make for Tally Entry in Financial Year 2018-2019.
Article is very useful
Thank you sir
If a client deposits cash over 2 lacs in my account without my knowledge can I transfer the amount back to him or is there any other mode of return. Do I need to intimate my ITO about this?
If the seller is giving receipt for more than 10000, is it is eligible for accounting?
Dear Sir,
Please provide me some details.
1. cash received limit from sundry debtors
सर
माझे नावाने बँकेत ठेव आहे माझे कुठलेही बँकेत खाते नाही मला ठेवी वर किती रक्कम लोन म्हणून कॅश मध्ये मिळेल ? बँक कॅश देत नाहीत ते चेक किंवा खाते मध्ये देतो म्हणतात
Sir,
I am second hand car dealer. One of my customer deposit Rs.2 lacs into my company accounts for purchase of car. Is i am liable to pay 100% tax on that amount deposited to my account. How can i solve this problem. Please advise suitably.
can i pay cash in bank account of seller against bill of 1 lack in two time
can a school collect cash fees from one single parent amounting to Rs one lakh (100000) and if it can collect then what is the limit of cash collection.
I have received 2 lakhs cash from a single person.how can I book in cash receive in diff. date.
I am planning to buy a water tank worth Rs 16000/-. I dont have GST registration. I need the tank for my house use. So can I pay Rs 16000/- in cash to the shopkeeper?. Am I violating any laws?
i have purchase material for 34500 single invoice for business and paid cash rs.10000/- on various dates 10000*3 and 4500 is it allowed or attract 269st? pls reply
Sir, I am a registered vendor under GST. another registered buyer purchasing goods with me. his one day purchase with me near about Rupees 48000.00 and he always paid me cash immediately. he is purchasing goods with me in the whole year near about 20.00 lack. is this violence of the law?
A Pvt limited hospital charge us more than 2 lack in cash. Even disappointed us. Black mailing us. Please give write suggestions.
Can we collect cash more then 2 lac from a person in one financial year, against 4 different different invoices of Rs.0.75 Lac(0.75 * 4 = 3.00 lac)
when a customer depositing cash rs.2 lakh and more then the receiving party what will do
in this scenario what we should do
i AM A EMPLOYEE OF STAE GOVERNMENT. WE HAVE TO PAY RS 35,000 IN CASH TO AN ARTIST FOR A CULTURAL PROGRAME. KINDLY ADVISE WHETHER WE MAY MAKE PAYMENT IN CASH OR NOT.
ALSO EXPLAIN DIFFERENCE OF RESTRICTION OF ABOVE RS.2.00 LAKHS AND RESTRICTION OF ABOVE RS 10,000
If I propose to get a loan, say Jewel Loan, from a Finance Company for an amount of Rs.1.50 lakhs,
whether I can get cash?
Dear Sir
Please tell me my sale during the year with second party aprox 20 lcs
can i received 20 lac cash during this year 10000 per day ?
What if I have received Rs 200000 in cash, which is inclusive of TCS.
Sale consideration 1500000
Cash Tr 200000(198020 for car & 1980 for TCS)
nOW THIS ATTRACT A PENALTY OF U/S 269 ST??
In e-Com business delivery boy collects COD/ DOD amount ( Invoice value) other than freight amount in cash more than Rs.2.00 lacs from party and in turn e-Com company pays said COD/ DOD amount ( Invoice value) to seller by cheque. Is this Rs.2.00 lacs receipt attracts penalty us 269ST
in hospital the patient paid more than Rs.2 Lakhs in different admissions on the same day. Is it violated of act or not?
We are purchasing under Rs.1.90 Lakh from a single supplier 20 times in a year, can we pay cash to supplier Rs. 10 lakh in instalment during the F.Year
What is your opinion on capital introduced by Partners in Firm or LLP..exceeding 2 lakh in cash on same day or splitted in multiple days..is it covered..?
If customer deposited 20000 cash into bank a/c against outstanding invoice of Rs.22000.00
how should i record this transaction in books of account.
If customer deposited 20000 cash against outstanding invoice of Rs.22000.00
how should i record this transaction in books of account.
Can I payment to a creditors in a year Rs. 195000/- through payment voucher of Rs. 10000/- each par day
Can I received from a debtors Rs. 180000/- in a year through amount less then Rs. 10000/- per day
if we have received more than 2 lakh rupees for different different date against different bills date than penalty applicable ???
Hi ankur,
In sec 269ST (3) on single occasion from a person.
So in example of marriage not suitable in your article because relatives if pay less than 2 lac so aggregate more than 2 lac is exempted.
So please change your article.
we are f&G distribution of goods, we receive almost cash every of RS 50,000/- from 100 customers,
sec 269st applicable.
Please advice.
Thanks & regards
If a wholesales business issued many invoices to retailers each less than 2 lakhs. in this connection receives cash 10000/- per day from his customer on different dates.. then also does the penalty arises?
example: total invoices 50, amount rs 950000, cash receipts 10000. * 95 days.
also need this answer… If we raised 2 invoice to a person of RS 170000/- both at different dates , can we receive cash against these invoices.?
dear sir, If amount exceeding 200000/- of hospital bill and different invoice are prepared on same decease then penalty will charge to hospital to accept cash from same person on different date.
If a business owner sales his goods via 2 valid invoices, which are less than rs.2lakh per invoice .. and receives cash from his customer on different dates.. then also does the penalty arises?
What will be the position in case where total rent of premises for the year is Rs. 15 lakh and amt. recds. in cash 1.25 per month.
is penalty u/s. 269 ST applicable.
Donation received for a specific purpose more than Rs2 lake by a Religious institute by a single person &
Less than 2 lakh from different persons say One Lakh aggregating to Rs10 Crowe Can u please clarify
Cash payment restrictions doesn’t apply to payment or receipt of loan above Rs. 2 lakhs as per CBDT’s circular issued later. Requesting the author to clarify the same.
if a person receives in cash for 2 lkhs or more he will be liable to penalty of 10% of the receipt, If the said amount is a business expenditure same will be disallowed as expenditure. so the tax will be paid by payer and penalty will be paid by receiver ,am i right.
What about if a farmer receive sale consideration of his crop exceeding Rs 2 lakh in single day i.e. one lot of crop
Whether penalty u/s 269ST will be imposed in case of receipt of school fees wherein quarterly fees is less than Rs, 2 Lakhs, however, total fees is more than Rs. 2 Lakhs in a year.
Thanks to author for drafting such a informative article.
The section speaks of receipt from a person. Hence in my view on the occasion of a marraiage if gifts are received from more than one person and the aggregate of the gifts exceed Rs. 2 lakhs the section is not attracted
Your interpretation in point C – Single event / occasion is not correct to levy penalty on gift received aggregating Rs. 10 lacs even less than 2 lacs from each relative.
Reply: while go through the section it is mentioned that –
In respect of transactions relating to one event or occasion from A PERSON.
“A PERSON” clarifies that penalty shall not be levied is less than 2 lacs from A PERSON.