Section 269ST: Penalty on cash receipt of more than 2 lakh!

Section 269ST

With the new wave of going cashless, a new Section 269ST has been proposed by union government in the Financial bill 2017. It is bringing a great change in the Indian economy as not only affecting the every-day life of commoners but also the upper crust. The reason is placing of restriction over receiving cash from a person beyond a certain limit. Further, Penalty for violating the provisions of this section is too high.

We will discuss everything about it in this blog so If you know just a little bit or nothing about it then you have come to the right place. We will guide you through it by answering all your concerned questions. Let’s first understand:

What is Section 269ST?

This section concerns only those people who are receivers. It means, receivers of the cash will be the one getting affected not the person who gives it. It is in effect from this financial year i.e. from 1st April, 2017.

Let’s see what it states:

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

otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account.”

Confused? It’s okay we will explain you about it step by step and part by part. So let’s first begin with the part (a)

a) In aggregate from a person in a day

This simply states that a person cannot receive 2 lakh in cash, even if the transaction is in 2 different bills from the same person. Suppose you are a jeweler, now if someone buys a jewelery from you of 3 lakh in cash. Then the penalty will be on you as you are the receiver. Even if you try to split the bill,  the entity will remain same.

On the other hand, it is okay if the amount is received from two different person and the amount received from both is less than the specified limit. Suppose from one person you receive Rs. 1.75 lakh for a jewelry and from another person you receive cash of Rs. 50,000 for other item. Then it’s not a violation of section.

Now let’s move to part (b)

b) In respect of a single transaction

You probably are aware of contractors and that they receive payment only when some percentage of their work gets complete. Their most of the payment is cash receipt based and even they require cash regularly for wages, material, day to day needs etc. Well now in a single contract they can’t receive cash more than Rs. 2 lakh, even if the contract is of 1 year or 5 years. All the transactions has to be done either by draft, cheque or bank to bank electronic transfer.

And let’s understand the last part (c)

c) In respect of transactions relating to one event or occasion from a person

If you’re an Indian then you are surely aware of the weddings and the part cash plays in it. Well occasions or events like that will also come under these section. Since it is not specifically mentioned that means that it’s applicable everywhere. Hence cash gifts received on any event, that were a part of exempt income, may also be taken into consideration under this section. Don’t you agree it’s a good step taken towards abolishment of the dowry system in India?  

So then how can a person receive an amount more than of 2 lakh?

Well that is what it said in the last line that you can receive an amount more than of 2 lakh by cheque, or by bank overdraft or by ECS.

ECS is the electronic transfer of amount from one bank account to another .i.e. through Internet banking.

Penalty:

The penalty imposed on breaking the law, is the 100% of the amount . This means that if you don’t follow the rule mentioned in Section269ST and get caught into the scrutiny of the tax department then penalty on the transaction will be equal to it. Suppose in case, the transaction was of 5 lakh then penalty will be of 5 lakh.

Withdrawal of cash from bank:

There was panic among people that what if they want to withdraw cash from bank? Because in that case they become the receiver. According the recent  press release, it has been clarified by tax department that common man can withdraw any amount from bank. In this case, penalty will not be levied under Section 269ST.

So, is there anyone on whom this section is not applicable?

Yes this section is not applicable on

  1. Government, any banking company, post office savings bank or co-operative bank.
  2. Also all those transactions that are referred to in section 269SS.
  3. And all those either a person or group of persons or an entity or receipt to which central government officially approved, announced or published.

In a nutshell, government is trying to restrict the big transactions held in cash by anyone even if it’s a firm or company or individual. The lesser the transaction in cash more they ( government ) will be able to control black money market. Even they have restricted every possibility of escape from this section. We hope this will bring some positive changes in India and will help it to move forward.

FAQs:

What if I want to withdraw cash for my personal use?

If you are withdrawing any amount in cash from bank then there is no restriction. It has been officially announced that Withdrawing cash from bank will not be considered in it.

What if I purchased 2 sets of jewelry and I made the payment by making 2 different bills?

The section will be violated in this case because as it states in part (a) that in a single day from a single person the total amount can’t exceed 2 lakhs. Moreover, Penalty is on receiver, not on payer.

Is exempt income is covered in this section?

It may be that, this section is applied on both taxable and exempt income. This means that gifts received from relatives may also be considered under Section 269ST. Hence in order to comply with this section no gifts should be received in cash above 2 lakh from relatives.

Read more about 10 tax changes impacting new F.Y. 2017-18.

If you have any queries or suggestion regarding this blog, let us know in comment section. We would love to help you out!!
Published
Categorized as Blogs
CA Abhishek Soni

By CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.

24 comments

  1. Hi,
    as i have read the notification as well budget also and got to know that limit is Rs 3 Lakhs not Rs 2 Lakhs as on finance ministry site memo also shows 3 Lakhs please amend the article is we\ill confuse the readers.

      1. Dear Mr Devendra Gehlod

        Initially, the limit proposed for section 269ST under the Memorandum to Finance Bill was Rs.3 lakhs by the Finance Minister. However, the same has been revised from Rs. 3 lakh to Rs. 2 Lakh by the Hon’ble Finance Minister in the parliament. This can be checked from the Finance Act, 2017 which has got the assent from President of India. Also, section 269ST has been updated on the income tax website with the new limit of Rs. 2 lakh. For the purpose of limit in this blog, we have taken the reference from Finance Act, 2017. Therefore, there is no requirement to amend this article.

  2. Sir
    Myself is trader and i trade goods to the dealers to which we make invoice per day of some amounts 10000 / 20000 or vise versa and which are credit billing and we accept the cash against this bills after 15-20 days or minimum 7 days to which the total t’over for this dealer could exceed in a year 300000 and cash receipts for their invoices after a 7days period or 15-20 days .
    so just wanted to confirm that what would be status for multiple billing and multiple cash reciepts which are not getting cash for invoice same day or nor the 2lac transaction because some of unregistered dealers still giving cash payment against the invoice made .

    1. Dear Mr. Arun,
      ​Thanks for your query, it is worth appreciating. We are glad to answer it.
      As per law, you can not receive an amount of ​Rs ​Two lakh or more​ in Cash​,
      a) in aggregate from a person in a day;
      b) in respect of a single transaction; or
      c) in respect of transactions relating to one event or occasion from a person​.​

      Therefore, Please ensure that no condition is violated as per the above mentioned ​provision​.​ Prima-facie, considering your case, you can accept the cash for different transactions and invoices subject to the other conditions. ​However, it must be noted that it must not be a way to escape the requirement of law i.e. said transactions must be supported by your business nature and custom of trade practice. Further, you can connect with us at [email protected] or at +09660996655 for customized opinion and safe tax planning.

  3. What if two different pieces of land is bought from the same person and there will be two different regestries? Can cash be paid 2 lakh for each piece of land?

    1. Dear Mr. Haris,

      ​Thanks for your query, it is worth appreciating. We are glad to answer it.

      As per law, you can not receive an amount of ​Rs ​Two lakh or more​ in Cash​,

      a) in aggregate from a person in a day;

      b) in respect of a single transaction; or

      c) in respect of transactions relating to one event or occasion from a person​.​

      Therefore, Please ensure that no condition is violated as per the above mentioned ​provision​.​ ​ ​We needed more information ​on your query​ for opinion​, therefore, you can connect with us at [email protected] or at +09660996655 for customized opinion and safe tax planning.

  4. Can I receive cash more than 2 lakh from a single person in a financial year for more than a single bill (single bill is below 1 lakh ) & per day cash receive is not more than 10000 rupees

    1. Dear Mr. Akshat goel,
      ​Thanks for your query, it is worth appreciating. We are glad to answer it.
      As per law, you can not receive an amount of ​Rs ​Two lakh or more​ in Cash​,
      a) in aggregate from a person in a day;
      b) in respect of a single transaction; or
      c) in respect of transactions relating to one event or occasion from a person​.​

      Therefore, Please ensure that no condition is violated as per the above mentioned ​provision​.​ ​Prima-facie, there is no violation of law in your case. However, it must be noted that it must not be a way to escape the requirement of law i.e. said transactions must be supported by your business nature and custom of trade practice. Further, you can connect with us at [email protected] or at +09660996655 for customized opinion and safe tax planning.

  5. I AM HAVING A RETAIL COUNTER AND HAVE TO SALE IN CASH IN DIFFERENT TOWNS AND THEY ALWAYS PAY CASH AND THEIR BILLS IN A FINANCIAL YEAR INCREASED MORE THAN 300000 TO 400000 BUT IN DIFFERENT DATES AND ON DIFFERENT BILLS AND I HAVE TO ACCEPT CASH IS THE SECTION VOILATES OR NOT PLEASE GUIDE US.

    1. Dear Mr. Shreeram,

      Thanks for your query, it is worth appreciating. We are glad to answer it.

      As per law, you can not receive an amount of Rs Two lakh or more in Cash,

      a) in aggregate from a person in a day;
      b) in respect of a single transaction; or
      c) in respect of transactions relating to one event or occasion from a person.

      Therefore, Please ensure that no condition is violated as per the above mentioned provision. Prima-facie, considering your case, you can accept the cash for different transactions and invoices subject to the other conditions. However, it must be noted that it must not be a way to escape the requirement of law i.e. said transactions must be supported by your business nature and custom of trade practice. Further, you can connect with us at [email protected] or at +09660996655 for customized opinion and safe tax planning.

  6. who are educational tour operators for educational institution we are providing domestic and international tours who are raising the bill in the name of school but we are receiving the cash payment from various students it will cross more than two laks it is single event in this penalty is applicable or what please advise us how to deal with this

    1. Dear Mr. Nagaraj NS,

      Thanks for your query, it is worth appreciating. We are glad to answer it.

      As per law, you can not receive an amount of Rs Two lakh or more in Cash,

      a) in aggregate from a person in a day;
      b) in respect of a single transaction; or
      c) in respect of transactions relating to one event or occasion from a person.

      Therefore, Please ensure that no condition is violated as per the above mentioned provision. Prima-facie, considering your case, you cannot accept the cash for a single bill and single transaction. You can accept the cash for different transactions and invoices subject to the other conditions. However, it must be noted that it must not be a way to escape the requirement of law i.e. said transactions must be supported by your business nature and custom of trade practice. Further, you can connect with us at [email protected] or at +09660996655 for customized opinion and safe tax planning.

  7. I bought a two wheeler by paying cash of rs.75,000/. If this cash paymnt I wil get any problem from it dept…plz answer sir

    1. Dear Swathi,

      You can make the cash payment of Rs. 75,000/- in cash if this is your income from explained source. Just need to ensure that you show your total income in ITR. There will be no problem if you have duly shown your correct income in the ITR and, thereafter, made the payment in cash for the two-wheeler. However, if you have the income from Business and Profession head, then there are some other tax consequences depending upon the nature of business and income etc. For customised opinion and safe tax planning, you can connect with us at [email protected] or at + 096609 96655.

  8. Sir,

    Can a business firm receive cash less than 2 lakh as a part payment of bill which exceeds 2 lakh , and balance will be received by account payee cheque.

    1. Dear Mr. Abdul,

      As per Sec 269ST, 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 otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account. Therefore, Please ensure that no condition is violated as per the above mentioned provision. Prima-facie, considering your case, there is no violation of law since cash amount is not exceeding Rs. 2 Lakh. However, it must be noted that it must not be a way to escape the requirement of law i.e. said transactions must be genuine, supported by the proper documents, in accordance with the business nature and custom of trade practice. Further, you can connect with us at [email protected] or at +09660996655 for customized opinion and safe tax planning.

  9. Suppose a Company is showing in its books, that it has received Rs 1.9 lacs at Branch A and Rs 1.8 lacs at Branch B from the same party on a single day.
    Whether it is a violation of Section 269ST ??

    1. Dear Mr. Krishna,

      Thanks for your query, it is worth appreciating.

      As per law, you can not receive an amount of Rs Two lakh or more in Cash,

      a) in aggregate from a person in a day;
      b) in respect of a single transaction; or
      c) in respect of transactions relating to one event or occasion from a person.

      Therefore, Please ensure that no condition is violated as per the above-mentioned provision. In your case, we would suggest you not to accept the cash payments in order to avoid any future litigation. In other words, the transaction must not be in a way to escape the requirement of law. Further, you can connect with us at [email protected] or at +09660996655 for customized opinion and safe tax planning.

  10. WHEN ONE BILL OF RS.200000/- AND CASH RECEIVED 50000/- AND BY CHEQUE 50000/- SO THIS TRANSACTION REQUIRED TO REPORTING?

    1. Dear Mr. Mustak,

      Thanks for your query, it is worth appreciating. We are glad to answer it.

      As per law, you can not receive an amount of Rs Two lakh or more in Cash,
      a) in aggregate from a person in a day;
      b) in respect of a single transaction; or
      c) in respect of transactions relating to one event or occasion from a person.

      Therefore, Please ensure that no condition is violated as per the above mentioned provision. Prima-facie, considering your case, there is no violation of conditions of Sec 269ST. However, it must be noted that it must not be a way to escape the requirement of law i.e. said transactions must be supported by your business nature and custom of trade practice. Further, you can connect with us at [email protected] or at +09660996655 for customized opinion and safe tax planning.

  11. Suppose if one person receives money through bank draft, however this bank draft is made by payor by paying money in cash with a bank branch. Will it be considered as violation under this section by receiver ?

    1. Dear Mr. Neeraj Goyal,

      Section 269ST is not applicable to the cash receipts by the Bank. Also, as per the press release issued, it has been clarified by the tax department that common man can withdraw any amount from the bank. In this case, the penalty will not be levied under Section 269ST. Accordingly, as per the one possible view, money withdrawn through Bank Draft from the Bank will not fall under the violation of section 269ST. For customised opinion and safe tax planning, you can connect with us at [email protected] or at +09660996655.

Leave a comment

Your email address will not be published. Required fields are marked *