Mr Sharma is amid an unexpected financial instability. He has to look after his business expenses as well as his child’s higher education. To curb this financial crunch, he resorts to a loan from an acquaintance willing to provide him with cash.
But, before he proceeds, is there something he must know about accepting certain deposits or loans? Yes, before applying for a loan or taking deposits, every individual must be well-versed with the restrictions that Section 269SS of Income Tax Act imposes.
As per Section 269SS of the income tax act, no one can accept a loan or deposit from any person that is not in the form of an account payee cheque, bank draft or ECS (Electronic Clearing System). This is applicable if:
Suppose Raju requires a loan of Rs. 10,000, an advance of Rs. 8,000 and a deposit of Rs. 7,000. In this case, this sum exceeds the Rs. 20,000 mark, so Raju cannot accept the entire amount in cash.
In simple terms, one must accept loans or deposits in no other form than bank drafts, electronic transfers, or account payee cheques for an aggregate amount of over Rs. 20,000.
What is an aggregate amount?
You will know about it in the following sections.
As per the income tax rules, the specified modes of accepting loans or deposits or specified sums are:
Specific exemptions under Section 269SS of the income tax act are discussed below. This includes deposits or loans acquired or accepted from the following entities:
Also Read – How To Use Online Income Tax Calculator?
Regarding this, if any individual receives a loan or deposit from the entities mentioned above, or if these entities accept deposits or loans from any individual, the restrictions under Section 269SS of the income tax act will not be applicable.
In addition, this Section under the Income Tax also provides an exemption under the following conditions:
Individuals or entities not falling under such exemptions will have to pay penalties.
The violation of Section 269SS of the Income Tax Act will result in a penalty equalling 100% of the amount involved if it is above the prescribed limit.
Let us understand the effects of violating this section through some examples.
The responsibility to steer clear of such penalties is on the acceptor of such an amount of money. For instance,
Suppose Mr Dubey owed Rs. 50,000 to Mr Sharma. On December 4 2021, Mr Sharma received the entire sum as a deposit in cash. As Mr Sharma is the acceptor here, he will be penalised under Section 271D because his accepted deposit exceeded Rs. 20,000.
As mentioned earlier, the aggregate amount is the total amount that someone receives in a single day. This includes previous unpaid amounts. To meet the compliances under this Section, the total amount that an individual receives in a day should be considered without considering the transaction’s nature. For example,
Suppose Mrs Agarwal received Rs. 30,000 in cash on December 4 2021, as a deposit amount from Ms Singh. Out of the total amount, Rs. 10,000 belongs to the same day and Rs. 20,000 belongs to previous deposits.
In this case, the aggregate amount will be the penalty, i.e., Rs. 30,000. As a result, Mr Agarwal will have to pay a penalty of Rs. 30,000 under Section 271D.
The primary objective behind Section 296SS of the Income Tax act was to counteract tax evasion in the country. The aim was to prevent currency transactions, thereby allowing banks draft and account payee cheques for permissible monetary transactions.
Ans: No, this will be a violation of Section 269T. The Section states that individuals cannot repay any amount exceeding Rs. 20,000 through the medium of cash. So, to avoid penalties, make sure to repay a loan through ECS, bank draft or account payee cheque.
Ans: Yes, on March 9 2017, RBI announced the inclusion of this Section to NBFCs across the country. This decision was made after a raid conducted by the Income Tax Department led to the detention of some individuals who were stashing illegal cash through false cash transactions.
Ans: Yes, Section 269SS is applicable to every person taking a loan above Rs 20,000 even if it is for a personal purpose from any source.
Ans: With effect from the 1st day of September 2019, the words “bank account”, got substituted with the words “bank account or through such other electronic mode as may be prescribed”.
Ans: The term specified sum in this Section refers to the overall sum of money receivable. This could be an advance or deposit concerning the transfer of any immovable property or asset. This definition is applicable even if the transfer does not take place.
Ans: The Income Tax Department had previously stated that one could repay the loan amount in cash to any HFC or NBFC if every instalment is less than Rs. 2 lakh. To stop the use of large cash transactions and control black money in the economy, the government came forward with Section 269ST of the income tax act.
Ans: The tax auditor is entitled to mention any transaction that falls under Section 269SS of the Income Tax in Clause 31 of Form 3CD. Regarding this, both parties, namely the receiver and payer, also have to report any transactions that exceed Rs. 20,000.
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
|Section 145A||Section 80P||Section 92CD|
|Section 281||Section 32(2)||Section 270A|
|Section 1399||Section 192A||Section 11|
|Section 35AD||Section 80C||Section 32|
|Section 206AA||Section 92E||Section 9|
|Section 153||Section 10(10D)||Section 194DA|
|Section 10AA||Section 80GG||Section 80TTB|
|Section 80JJAA||Section 1940||Section 23B|
|Section 206AB||Section 44AB||Section 87A|
|Section 115JB||Section 154||Section 194D|
|Section 194J(1)(ba)||Sectio 80U||Section 194K|
|Section 56-59||Section 80TTA||Section 234C|
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