INTRODUCTION : The Finance Bill, 2017 has proposed to introduce a new section 269ST in the Income Tax Act with effect from 01st April, 2017 whereby a restriction is imposed on receipt of any amount of Rs. 3 lakhs or more through modes other than the modes prescribed in that section. This limit is mentioned in many ways like according to per day, per transaction, for all transactions per occasion / event etc.
In this section it has been mentioned that “No person shall receive an amount of three 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.
In this article an attempt has been made to analyze that how the above limit may be computed under the different circumstances.
Through clause (a) limit is put on receipts from a single entity in cash etc. other modes in a single day (i.e., in one date). This limit is not for each receipt from an entity in a day but for aggregate receipts from any single entity in a day. This limit is also only in respect of receipts from a single entity and not from multiple entities.
For Example : (i) If Mr. A receives a single payment of Rs. 2 lakhs from Mr. B in a day there is no violation of this section. (ii) If Mr. A receives single payment of Rs. 3 lakhs from Mr. B there is a violation of this section. (iii) If Mr. A receives Rs. 2 lakhs from Mr. B in a day in piecemeal then there is no violation. (iv) If Mr. A receives Rs. 3 Lakhs from Mr. B in a day in piecemeal, then there is a violation. (v) If Mr. A receives Rs. 2 Lakhs from Mr. B and also Rs. 2 Lakhs from Mr. C in a day (transaction with Mr. B & Mr. C is not a single joint transaction) then there is no violation. (vi) If Mr. A receives Rs. 2 Lakhs from Mr. B on one day and Rs.1 lakhs on any other day then there is no violation.
When a part amount is received through account payee cheque etc. permissible mode and rest amount is received through cash etc. other mode then the whole limit of “less than Rs. 3 lakhs” will be only in respect of amount received through cash etc. other modes and the amount received through permissible modes will not be included.
For Example : – (i) If Mr. A receives Rs. 2 lakhs from Mr. B through account payee cheque and Rs. 2 lakhs in cash then there will be no violation. (ii) However, if Mr. A receives Rs. 2 lakhs from Mr. B through account payee cheque and Rs. 3 lakhs in cash then the limit of less than Rs. 3 lakhs through cash etc. other modes will be crossed and there will be violation of section 269ST.
Through clause (b) restriction is put in respect of each transaction also. This limit will work simultaneously with the limit of aggregate receipt per day from a single entity. According to this an entity can receive only less than Rs. 3 lakhs in respect of a single transaction through cash etc. other modes. An amount more than this limit can be taken only through account payee cheque etc. mode.
For example, (i) if Mr. A sales goods to Mr. B through a single bill for Rs. 4 lakhs then only less than Rs. 3 lakhs can be received by A from B in cash etc. mode. The rest amount will have to be received through account payee cheque etc. mode only. Even it is not permissible to receive in cash etc., the entire Rs. 4 lakhs in different days in piecemeal within the limit of per day per entity. It is so because not only the limit of per day per entity is to be followed but also the limit of per transaction is to be followed simultaneously. (ii) If Mr. A sold goods of Rs. 4 lakhs to Mr. B through two different bills of Rs. 2 Lakhs each. Then entire Rs. 4 lakhs can be received by him from Mr. B in cash etc. in two or more days complying with the limit of per day per entity because here the limit of per transaction as well as of per day per entity is not crossed.
If a transaction is a joint transaction with many entities in such a situation also this limit will be a consolidated limit in respect of all the payees for that single transaction. Separate limits will not be available in respect of each payee in respect of a single transaction.
For Example- Mr. A sold goods to Mr. B and Mr. C jointly for Rs. 4 lakhs through a single bill. Then total amount of only less than Rs. 3 lakhs can be received in cash etc. from Mr. B and Mr. C. It is not permissible that Rs. 2 lakhs in cash etc. is received from Mr. B and rest Rs. 2 lakhs is received from Mr. C.
Through clause (c) restriction is put in respect of all the transactions which are related with any single event or occasion. This limit will be applicable simultaneously with the limit of aggregate receipt per day from a single entity as well as with the limit in respect of single transaction. According to this, an entity can receive only less than Rs. 3 lakhs in respect of all the transactions which are related to single event or occasion. Here no definition / description of the words “event” or “occasion” has been given in section 269ST. In such a situation their meaning can be taken as they are understood in the real practical life e.g., marriage, birthday, accident, tour etc.
For example:- If a person has done work of different nature in a marriage of his customer, say, given garden on rent for marriage reception, given tent house services, done decoration and has issued three different bills of Rs. 2 lakhs each for each separate service (total Rs. 6 lakhs), then he can receive only 3 lakhs from his customer in cash etc. mode in respect of all the 3 bills / transactions. If entire Rs. 6 lakhs are taken in cash etc. then even though the limit of per transaction and also limit per day per entity is not crossed, but since all the transactions are related with the single occasion of a marriage, then the limit will be a single limit for all the related transactions.
LACUANA REMAINED: Though the government has tried to cover almost all the transactions / situations in the above section but it appears that two lacunas have remained. Firstly, when the transactions are not related with a single event or occasion, an entity may prepare many bills of less than Rs. 3 lakhs and may receive a big amount in cash (complying with per day per entity limit).
Secondly, in clause (c) the words “from a person” have been used. Due to this now the language has became that “No person shall receive an amount of three lakh rupees or more in respect of transactions relating to one event or occasion from a person”. In cases where there are more than one transaction and they are related with one event or occasion, the entity will fell in clause (c) and in such a situation, separate limit will became available for different persons in a joint transaction.
For example, if for a marriage there are 3 different bills of Rs. 2 lakhs each (total Rs. 6 lakhs), and all the three bills are in the name of three different persons say one bill of Rs. 2 lakhs is in the name of the person who is being married, second bill is in the name of father of that person for Rs. 2 lakhs and the third bill is in the name of the mother of that person for Rs. 2 lakhs. Then in such a situation entire Rs. 6 lakhs can be paid in cash etc. mode i.e., Rs. 2 lakh by the person being married, Rs. 2 lakhs by the father and Rs. 2 lakhs by the mother. Even if all the bills are in the joint names of three persons then also the payment can be made in the above manner.
Here it is mentionable that in respect of clause (b) the payment by multiple persons (over limit) is not possible because the word “from a person” has not been used there.
PRACTICAL STEPS THAT MAY BE FOLLOWED: Before receiving any amount, firstly it will have to be considered that whether there is a single transaction or multiple transactions. If multiple transactions are there then whether they are related with the single event or occasion or are independent. If related then amount in respect of all the transaction from all the persons (by going in positive sense avoiding lacuna) should not be received in cash etc. over the consolidated limit. Further the limit of per day per entity should also be followed. If they are not related then the limit of single transaction alongwith per day per entity limit should be followed. If there is only single transaction then also the limit for transaction as well as of per day per entity should be followed.
CONCLUSION : The above manners of computing the limit are only in respect of several typical circumstances. There may be many other type of circumstances where these limits are to be applied according to the circumstances. The tax payers should avoid the lacunas and should make best effort to comply with the provisions as per the intent of the government to make the economy less cash.
The author has prepared his own video lecture on the above topic in hindi language (Part II). The link for the same is : https://youtu.be/G6inkl_UtLM
Disclaimer: The information contained in the above article are solely for informational purpose after exercising due care. However, it does not constitute professional advice or a formal recommendation. The author do not owns any responsibility for any loss or damage caused to any person, directly or indirectly, for any action taken on the basis of the above article.