Sec 269ST relaxed for Centres providing COVID treatments

section 269ST
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Modi Government intends to promote the campaign “Digital India” and to curb tax evasion from the country. With an intent to stop the circulation of black money, the Government had announced Demonetization on 8th November 2016. Moving a step further, a new section 269ST was introduced with an intent to regulate the transactions in cash.  

Section 40A (3) imposes restrictions on a person from making payment in cash but before the introduction of section 269ST, there was no provision in the Income Tax Act that restricted a person to receive cash.

Sec 269ST relaxed for Centres providing COVID treatments

The Second-wave of the Novel Corona Virus has again brought the country to a standstill. The number of positive cases in India requiring hospitalization had seen a significant rise in the months of April 2021 & May 2021. The government has been taking steps proactively to meet the ends. The government has notified that if cash payment is received more than Rs 2 lakhs for the treatment of COVID patients by Hospitals, Dispensaries, Nursing Homes, Covid Care Centres, or similar other medical facilities then provisions of section 269ST will not be invoked.

Provided that cash payment is received in the period 1st April 2021 to 31st May 2021.

Provided that PAN or AADHAAR of the patient and the payer is obtained.

What is section 269ST? | Section 269ST of Income-tax

Section 269ST of the Income Tax Act restricts any person to receive an amount of more than Rs 2 lakhs or more in CASH

> From one person in a day (Limits receiving cash from one person in one day)
> For a single transaction (Limits receiving cash against one transaction by splitting the payment over the number of days)
> For one event or occasion from a person (Limits receiving cash for one occasion.)

Note: It imposes restrictions on the person receiving the cash and not on the one giving the cash. Contravention of the provisions of section 269ST will attract the penalty under section 271D.

When was 269ST introduced?

It was inserted vide Finance Act 2017 and made effective from 1st April 2017.

Who is covered by section 269ST? | Section 269ST will be applicable on whom?

Section 269ST will be applicable to each and every person defined under section 2(31).

Which mode of payment is permissible as per section 269ST?

Following modes of payment are permissible u/s 269ST read with rule 6ABBA

A/c payee cheque 
A/c payee bank draft 
Credit Card
Debit Card
Net banking
BHIM Aadhar Pay

What is out of scope of section 269ST? | Non-applicability of provisions of section 269ST

If more than Rs. 2 lakhs are being received by the following provisions of section 269ST will NOT APPLY

As per section 269(i)
Government – Central Government, State Government, Local Government
Banking Company – Public Sector Bank, Private Sector Bank, Post Office Savings Bank & Co-operative Banks

As per section 269(ii) –  Transactions of nature referred to in section 269SS (Refer which transactions)
As per section 269(iii) – Any other person/class of persons can be notified by the Central Government

Will section 269ST be applicable for capital receipts?

Section 269ST will be applicable for both the receipts in the capital as well as revenue in nature.

What is the penalty for contravention of section 269ST? |Penalty u/s 271DA

If a person violates the provisions of section 269ST and receives money in excess of Rs 2 lakhs then a penalty will be equivalent to the amount received.

Penalty u/s 271DA shall not be imposed if the taxpayer has valid and sufficient reasons for the violation of section 269ST, provided the taxpayer proves it to the satisfaction of the Assessing Officer.  Government should clarify or list down the reasons for a better understanding of what will constitute as good and sufficient reasons.

Note: Penalty u/s 271DA can be imposed by the Joint Commissioner of Income Tax.


The restriction imposed by the provisions of the above section has considerably reduced the circulation of cash. India is slowly moving towards the digital economy.

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About CA Ankita Khetan 167 Articles
Ankita is a Chartered Accountant in practice and holds a Diploma in IFRS (from ACCA, UK). She is also a Commerce PG and Certified Independent Director (from IICA). She holds a certification in Forex and Treasury Management. Her area of expertise is GST and Income tax. She is passionate about reading, writing, and sharing knowledge on areas related to finance and taxation.

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