Updated on: Apr 25th, 2023
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11 min read
Sections 269SS and 269T have been discussed in this article and this deals with cash payment and repayment of loans and deposits. Both the sections were introduced to curb the black money. Tax evasion is one of the serious problems in India causing economic disparities. False cash transactions give birth to unaccounted money which in turn increases tax evasion.
A person cannot accept loan or deposit or any other specified sum (specified sum here refers to an advance or otherwise, in relation to the transfer of any immovable property) from another person otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or other specified manner, if –
Therefore, in nutshell, a person cannot accept cash loan or deposit of Rs 20,000 or more from another person in a single day.
As per the income tax rules, the specified modes of accepting loan or deposit or specified sums are:
1. Any loan or deposit or specified sum “taken or accepted from” or “taken or accepted by” the following entities –
Thus, if any person accepts any loan or deposit or specified sum from the above-mentioned entities, or the entities accept any loan or deposit or specified sum from any person, provisions of 269SS will not apply.
2. A person earning only agriculture income accepts loan or deposit from another person also earning only agriculture income.
The persons may have other income (in addition to agricultural income) chargeable to tax under the Income Tax Act, however, there should not be any income tax liability after allowing exemptions and deductions.
3. Other exceptional cases:
Mr P had accepted a loan from ABC on 1st April 21 by account payee cheque for Rs 10,000. He had repaid 3,000 in cash on 3rd Aug 2021. 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) that is more than Rs 20,000, the provisions of Sec 269SS are violated.
Mrs J accepts a loan of Rs 12,000 in cash from Mr K and she also accepts 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.
Mr F takes a loan of Rs 10,000 in cash from Mr G on 12th December 2021 and accepts a further loan of Rs 9,000 from Mr G by an account payee cheque.
Since the new loan is taken by a prescribed mode, there is no violation of the provisions of Sec 269SS.
100% of the loan or deposit amount will be the quantum of penalty that can be levied by the assessing officer. A person accepting the loans and deposits in cash above the prescribed limit is liable to pay such penalty. Hence, the receiver of the money is required to ensure that the the provisions of Section 269SS are complied while accepting payments.
However, if the person is able to prove that there is a reasonable cause for such transactions, and there were no malafide intentions, he/she may not be penalised.
Section 269T prohibits any person to repay the loan or deposit or specified sum otherwise than by an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, if –
In nutshell, a person cannot repay the loan or deposit in cash, if the amount is Rs. 20,000 or more.
A person paying Rs. 20,000 or more towards repayment of loan or deposit does not have to comply with 269T if he pays to the following parties –
100% of the loan or deposit amount will be the penalty leviable by the assessing officer.
In clause 31 of Form 3CD, the tax auditor has to report the transactions that have been hit by the provisions of Sections 269SS and 269T . Both the parties (payer and receiver) have to report the transactions.
You can read clause 31 in detail, here.
The balance due from Shivani on 1st April 2021 is Rs 17,000 as per the account books of Rajkumar for the FY 2020-21. In FY 2021-22, the following transactions took place between Rajkumar and Shivani during the year:-
Accounting entries for FY 2021-22
Loan from Shivani A/c
Date | Particulars | Amount (in Rs) | Date | Particulars | Amount (in Rs) |
14.04 | To Bank A/c | 21,000 | 1.04 | By Balance b/d | 17,000 |
15.05 | To Cash A/c | 19,000 | 14.04 | By Cash A/c | 4,000 |
1.07 | To Bank A/c | 24,000 | 6.05 | By Cash A/c | 19,000 |
10.06 | By Cash A/c | 12,000 | |||
20.06 | By Cash A/c | 2,000 | |||
31.03 | To Balance c/f | 0 | 22.06 | By Cash A/c | 10,000 |
Total | 64,000 | Total | 64,000 |
Analysis of the case
No, this will be contravention of section 269T i.e. a person cannot repay loan amounting to more than Rs.20,000 in cash.
Yes, you can accept cash loan or deposit amount of Rs. 20,000 or more from the government or banking institution because it falls under exceptions of Section 269SS.
Yes, Section 269SS is applicable to every person taking loan above Rs 20,000 even if it is for personal purpose.
Yes, Section 269T is applicable to every person if the amount of repayment of loan or deposit exceeds Rs 20,000.
In clause 31 of Form 3CD, the tax auditor has to report the transactions that have been hit by the provisions of Sections 269SS and 269T . Both the parties (payer and receiver) have to report the transactions.
Sections 269SS and 269T focus on cash transactions, with penalties above Rs. 20,000. Exceptions apply for loans from certain entities or during emergencies. Reporting required in tax audits. Violation can lead to hefty penalties. Section 269SS involves accepting cash loans, while Section 269T pertains to repaying loans. Compliance essential to avoid penalties and facilitate transparency in financial transactions.