Allowable cash transaction as per section 269SS

Allowable cash transaction as per section 269SS

Finance plays the most important role in the business. Sources of funds to run any successful business are an individual’s own capital, loans, or accepting deposits. Accepting loans and deposits doesn’t remain easy after the introduction of Section 269SS and Section 269T in the Income-tax Act. These sections were introduced to curb black money and minimize tax evasion. Indian economy is facing a serious problem of false cash transactions which increases the unaccounted money giving rise to tax evasion. The section talks about the mode of taking or accepting certain loans, deposits, and the specified sum.

When is section 269SS attracted?

Where a person accepts loans, deposits, or any specified sum from any other person in cash or bearer cheque and if:-

1. The loan, deposit, or specified sum individually or in aggregate is Rs. 20,000/- or more.
2. The amount of loan, deposit, or specified sum is taken along with the amount remaining unpaid is Rs. 20,000/- or more.
3. Clause 1 and clause 2 in aggregate is Rs. 20,000/- or more.

Note: If any of the above is accepted by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account then it doe not violate the law. 

What is ‘Specified Sum’?

It refers to any sum in relation to the transfer of immovable property (whether the transfer takes place or not).

A few examples to understand the concept better

•  If Mr. A accepts a loan/ deposit/ specified sum of Rs. 21,000/- in cash or bearer cheque then section will be violated.
• If Mr. A accepts the loan of Rs. 10,000/- in cash or bearer cheque and deposit of Rs. 11,000/- in cash or bearer cheque then this section will be violated as the aggregate payment is more than Rs. 20,000/-.
• If Mr. A accepts a loan of Rs. 15,000/- in cash or bearer cheque and then accepts a loan again of Rs. 10,000/- in cash or bearer cheque then this section will be violated as the total is more than Rs. 20,000/-.
• If Mr. A accepts a loan of Rs. 15,000/- in cash of Rs. 15,000/- in cash or bearer cheque and repays Rs. 10,000/- in
  cash or bearer cheque and then again accepts a loan of Rs. 8,000/- in cash or bearer cheque then this section is not violated.

When is this Section not applicable?

The section does not apply to any loan/ deposit/ specified sum accepted from/ by: –

• Government
• Banking co., post office savings bank or co-operative bank
• Any corporation established by Central, state, or Provisional Act
• Government Company
• A few institutions, associations or body or class of institutions, associations or bodies notified in Official Gazette.

AND

• If both the persons (one who accepts and the one who gives loan/deposit/ specified sum) are having only agricultural income and have no income taxable under the Act, then also this section is not applicable.
• If any cash has been received from a relative for an emergency situation but the intention was not to evade the taxes.
• When partners contribute capital in form of cash into a partnership firm.

Consequences of violation of Section 269SS

A penalty under section 271D will be levied for the whole amount of loan/ deposit/ specified sum that was accepted.

Reporting of transactions covered u/s 269SS in  the Tax Audit Report (Form 3CD)

As per Clause 31(a) and 31(b) of Form 3CD, the auditor has to report the following:

Section 269SS from the bare act has been attached for ready reference

You may also like : 

• How to save Capital Gain Tax?
• Deduction u/s 80IC of Income Tax Act
• How to compute Capital Gains?
• Do you want to en-cash profit without paying Long Term Capital Gain Tax?
• Due date extended for GSTR 9, GSTR 9A and GSTR 9C
• Are PMS & PFL Fees deductible against Capital Gain?
• Capital Gain tax on inherited property
• How to tax two sources of income of a foreign company earned in India?