Cash Transactions and the Law: Understanding Section 269ST

In a bid to promote digital transactions and curb black money, the Indian government introduced Section 269ST in the Finance Bill of 2017. This section places restrictions on cash transactions, prohibiting the receipt of cash exceeding INR 2 lakhs in certain scenarios. Understanding the provisions of Section 269ST is crucial for businesses and individuals alike to avoid penalties and ensure compliance with the law.

Scope of Section 269ST

Section 269ST applies to any person receiving cash in the following situations:

  • Aggregate Cash Receipt from a Single Person in a Day: Receiving cash totaling INR 2 lakhs or more from the same person on a single day is prohibited, even if the amount is received through multiple transactions.

  • Single Transaction: Cash receipts of INR 2 lakhs or more related to a single transaction are not permitted. This means that a single invoice or bill cannot be settled with cash exceeding the specified limit.

  • Transactions Related to a Single Event or Occasion: Cash transactions or receipts connected to a specific event or occasion cannot surpass INR 2 lakhs. For instance, if an individual receives cash gifts exceeding this limit at a wedding or other celebratory event, it would violate Section 269ST.

Exemptions from Section 269ST

Certain entities and transactions are exempted from the purview of Section 269ST, including:

  • Government entities
  • Banking companies
  • Post office savings banks
  • Cooperative banks
  • Transactions covered under Section 269SS
  • Transactions as specified by the Central Government through notification

Penalties for Violation

Violating the provisions of Section 269ST attracts a penalty equal to the amount of cash received in excess of the specified limit. This penalty is imposed under Section 271DA and is applicable to the recipient of the cash, regardless of whether they have a PAN or are a tax assessee.

Implications for Businesses and Individuals

The implementation of Section 269ST has significant implications for businesses and individuals:

  • Businesses: Companies must ensure that they do not accept cash payments exceeding INR 2 lakhs for any transaction, invoice, or event-related expense. Failure to comply can result in substantial penalties.

  • Individuals: Individuals should be cautious when making or receiving cash payments, particularly in situations where the amount exceeds INR 2 lakhs. Accepting cash above this limit can lead to penalties and legal consequences.

Section 269ST plays a crucial role in the government’s efforts to combat tax evasion and promote transparency in financial transactions. By understanding the scope, exemptions, and penalties associated with this section, businesses and individuals can ensure compliance and avoid potential legal complications. Embracing digital payment methods and adhering to the prescribed cash transaction limits is essential for fostering a more transparent and accountable financial system.

269ST – Restriction on Cash Receipt of 2 lakhs or more|| CA/CS/CMA|| Income Tax || CA TARIQUE KHICHI


What happens if cash received in excess of 200000?

Introduction of Penal Provisions The government has also introduced penalty provisions if Section 269ST is violated. If a person receives the amount in cash over the above specified limit of Rs. 2 lakhs, he is liable to pay a penalty equal to the amount received in cash (Section 271DA).

What is the limit of cash receipt for 200000?

Section 269ST states that no person shall receive an amount of Two lakh rupees or more, in aggregate from a person in a day; in respect of a single transaction; or. in respect of transactions relating to one event or occasion from a person.

What is the maximum amount that can be paid in cash?

According to Section 40A(3), the Tax Act of India will disallow any expenditure over ₹10,000 that is paid for in cash.

What is the maximum cash received from customers?

Section 269ST of the Income Tax Act provides that no person can receive an amount of INR 2 Lakhs or more in cash: In aggregate from a person in a day; In respect of a single transaction; or.

What is the cash limit for payment to a transporter?

The cash limit for payment to a transporter is Rs. 35,000. You cannot receive cash in excess of Rs. 20,000 as any loan or deposit from any person. Under section 269SS a person should not have any loan/deposit exceeding 20,000 in cash. Penalty under section 271D will be applicable which is equal to cash loan accepted.

What happens if you accept cash over Rs 2 lakh?

Those who accept cash over Rs.2 lakh in violation of this clause may face a penalty equivalent to the amount received. For businesses, any expenditure in cash exceeding Rs.10,000 paid to a single person in a single day is disallowed as an expenditure. However, for transporters, this limit stands at Rs.35,000.

What is the penalty for a cash payment in India?

Suppose you received Rs. 5,00,000 from a single person for a transaction then you will be liable for penalty of Rs. 5 lakhs. Every cash payment in excess of Rs. 10,000 will be disallowed under section 40A (3). If you pay to someone in excess of Rs. 10,000 then that transaction you can not claim as expense in your Income tax filing.

Can a person accept a cash gift of Rs 2 lakh?

Instead, the same will need to be paid for through cheque, card payments, or a bank transfer. When it comes to gifts, any person cannot accept a cash gift exceeding Rs.2 lakh from a single donor and on a single occasion.

Leave a Comment