Section 269SS of Income Tax Act: Rules, Exceptions, Penalty

Section 269SS of the Income Tax Act, prohibits a person from accepting loans, deposits, or advances in relation to a transfer of an immovable property of Rs. 20,000 or more in cash. Such transfers must be received through prescribed banking modes such as account payee cheque, bank draft or electronic transfer. The Rs. 20,000 limit applies to transactions to:

• Per person
• Per day
• Single transaction

In simple terms, a person cannot accept a loan, advance or deposits of Rs. 20,000 or more from another person in cash. 

Specified Modes of Transaction Under Section 269SS

As per the income tax rules, the specified modes of accepting loans or deposits or specified sums are:

1. Account payee cheque or bank draft
2. Electronic Clearing System (ECS) through a bank account or
3. Net Banking
4. Credit Card
5. Debit Card
6. RTGS
7. NEFT
8. BHIM
9. IMPS and
10. UPI

What are the Exceptions to 269SS?

1. Statutory Exemption

Section 269SS does not applicable to loans or deposits taken or accepted from

• The Government
• Any banking company, post office savings bank, or co-operative bank
• Any corporation established by a Central, State, or Provincial Act
• Any Government company as defined under the Companies Act, 2013
• Any institution, association, or body notified in the Official Gazette

2. Agricultural Income Exception

Where, a person earning only agricultural income accepts a loan or deposit from another person also earning only agricultural income and neither of them has any Income chargeable to tax under the Act.

3. Other Exceptional Cases

• Receiving cash from relatives during emergencies without tax evasion intent.
• Partners contributing cash capital into a partnership firm.
• Where there is mere book entry and no receipt of money in cash or any other form.

Section 269SS Examples

1. Mr P accepted a loan from ABC on 1st April 2025 by account payee cheque for Rs 10,000. He had repaid 3,000 in cash on 3rd Aug 2025. On 25th September 2021 Mr P takes another loan from ABC for Rs 15000 in cash (the earlier loan remaining unpaid on the date).

Since the combined loan outstanding is Rs 22,000 (10,000 – 3,000 + 15,000), which is more than Rs 20,000, the provisions of Sec 269SS are violated.

2. Mrs J accepts a loan of Rs 12,000 in cash from Mr K and a deposit of Rs 15,000 in cash from Mr Z on the same day.

Section 269SS is not violated as the amount is not more than Rs 20,000 from one person.

3. On 12 December 2025, Mr F took a cash loan of Rs 10,000 from Mr G and accepted a further loan of Rs 9,000 from Mr G by account payee cheque.

Since the new loan is taken in a prescribed mode, there is no violation of the provisions of Sec 269SS.

Penalty For Violating Section 269SS

The Income Tax Act imposes a penalty of 100% of the loan, deposit or advance amount received through cash, on the person receiving such amount. 

However, if the person can prove that there was a reasonable cause for such transactions and no malafide intentions, penalty may not be imposed.

Reporting of Section 269SS Transaction

The tax auditor has to report Section 269SS transactions in the tax audit report in Clause 13 of Form 3CD. The disclosure should be done by both the lending and accepting parties. 

Difference Between Section 269SS, 269T And 269ST

Also Read:
1. Section 269T of Income Tax Act: Loan Repayment Cash Limit & Penalty