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SECTION 269ST- AMENDMENT EXPLAINED | Company Vakil
Digital India

The government of India is highly inclined to promote “Digital India” in recent years. In doing so, it has brought certain amendments in the Income Tax Act, 1961. Section 269ST is one of them and it was introduced in the year 2017.

According to the Central Board of Direct Taxes notification issued on 3rd July, 2017, circular number 22/2017, this section 269ST should be read with sec 269SS of Income Tax Act. Sec 269ST supplements sec 269SS.

Section 269ST

According to this new amendment, government has made it compulsory for every person who is accepting or receiving any loan payment or any other amount from another person or depositor in this case, must not accept any amount in aggregate in cash, which is in excess of Rs 2 lakhs –

  • Either in a single day
  • Or, in a single transaction
  • Or, in any transaction takes place on one event or occasion

The above amendment simply means, you being a depositor of any loan amount or any other amount to a Non-Banking Finance Company (NBFC) or Housing Finance Company (HFC) or any other financial institutions, can’t deposit an amount in cash which exceeds Rs 2 lakhs.

Mode of Payment

For any amount that exceeds Rs 2 lakhs, payment is required to be made through either electronic mode or through an account payee bank draft or an account payee cheque.

For amounts that are less than Rs 2 lakhs, cash payment is allowed for a single transaction in a single day on one event.

The government has prohibited the cash transactions of any amount exceeding Rs 2 lakhs in these cases in order to promote digital economy and bring transparency in the economic sector of the country.

Penalty

Under this new amendment, government has also provided for penalty in case of violation of section 269ST.

Penalty amount is fixed at the same amount that has been accepted by the person or company as a payment for any loan. Hence it is advisable to the person or finance companies to not to accept any amount in excess of Rs 2 lakhs in a single transaction in a single day.

Clarification to section 269ST

The Income Tax Department has issued some clarifications regarding this section with regard to confusion among the public.

The concern among the Housing Finance Companies and public was regarding whether this section will apply to the whole amount of loan payable or even every installments of it.

Regarding that officials issued a clarification that every payment that is payable in a single transaction whether it be a single installment or the whole loan payment, if exceeds Rs 2 lakhs will incur a penalty.

That means whether a receiver receives an installment of a loan of any amount and the amount is in excess of Rs 2 lakhs then he will be liable for a penalty of the same amount that is received by him.

For example, you being a receiver of any payment, receives either an installment or the whole amount, it wouldn’t matter. The only thing that matters is the receivable amount should not exceed Rs 2 lakhs at any cost in a single day.

Exemption from a Penalty

There is a provision of exemption from a penalty in some cases as mentioned in section 269SS of Income Tax Act, 1969. They are –

  • Any receipt accepted by government itself or any other government agency.
  • Banking institutions, Post-Office Savings Bank and Co-operative Banks are also exempted under this section.
  • Such other persons or class of persons or institutions as notified by government of India in it’s official gazette.
  • Other transactions as referred in section 269SS.

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