home loan tax benefits
Tax Benefits on Home Loans
April 26, 2018
section 269ST
Section 269ST – Introduction and Its Significance
April 26, 2018

Section 269SS – Introduction of New Provisions

Last Update Date : April 27, 2019
Estimated Read Time: 4 min

section 269ss

Finance is the bloodline of any business. Without finance it is impossible to run a business, as the individual’s own capital may not always be sufficient to finance the business. Hence, there is the need for capital to run a successful business. The most common way known to gain capital is either taking loans and accepting deposits. But one should keep in mind the laws levied upon the individual when accepting loans or deposits. After, demonetization it was quite clear that our government was taking steps to achieve a cashless and digital economy and the efforts made by government are being reflected in new provisions.

What is section 269SS?

To minimize the rising tax evasion, increase in black money and to significantly reduce the false accounts given for unaccounted money, the government has introduced this section.

Analysis of section 269SS

Mode of taking or accepting certain loans, deposits and specified sum.

No individual should take or accept from any other individual (herein referred to as the creditor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if:

  1. A person takes a loan or two, such that it exceeds Rs. 20,000/- or Rs. 10,000/- each or more.
  2. A person has already taken a loan of Rs. 20,000/- and asks the same person for another loan say, Rs. 5,000/-.
  3. the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), i.e. a person has taken loan say by cheque of Rs. 15,000/- and he wants another loan of Rs. 7,000/-.

Exceptions from Section 269SS

Provisions of this section does not apply to any loan/deposit or any sum taken or accepted from:

  • The Government;
  • Any banking company, post office, saving bank or any co-operative bank;
  • Any corporation established by a Central, State or Provincial Act;
  • Any Government company defined in clause (45) of section 2 of the Companies Act, 2013;
  •  Or any institutions associated with the Central Government may, for reasons to be recorded in writing, notify in this behalf in the official gazette.

It is further mentioned that the provisions under this section are not applicable to the individual providing/giving any loan/deposit or specified sum of money, and the person accepting or taking the loan/ deposit or specified sum of money, both are having agricultural incomes and neither of them has any tax chargeable income under the Income Tax Act.

Consequences of Violating the Provisions

Section 271D of Income Tax Act 1961 specifies that if a loan or deposit is acknowledged in breach of the provisions of section 269SS then a penalty corresponding to the amount of such loan or deposit, so taken or accepted, may be levied by the Joint commissioner.

Introduction of Section 269ST

As more and more awareness spread, special attention was given to curb the generation and circulation of black money. To help and strengthen the government’s motive new section 269ST was introduced to increase transparency, reduce cash transactions and fraudulent manipulation for tax evasion.
It was launched 1ST April’2017 by the Income Tax Department, for violation of the same different penalties will be faced by the individual.

All the companies and professionals must make changes accordingly in their system to keep an eye on all cash transaction to avoid penalty and prosecution under this provision.

What is Section 269T?

Section 269T of Income Tax Act specifies that any branch of a banking company or a cooperative society, firm or other person shall not pay any loan or deposit otherwise than by an account payee cheque or account payee bank draft drawn in the name of the individual, who has made the loan or deposit, if:

  1. The sum of the loan or deposit collectively with interest is Rs 20000 or more, or
  2. The collective amount of loans or deposits held by such entities/individual, either in his own name or jointly with other individual on the date of such repayment together with interest, is Rs 20000 or more.

For example: if Rahul is having loan of Rs 30000 outstanding to Yashika. Then Rahul cannot repay such loan in cash to Yashika.

Exceptions from Section 269T

The following entities/individuals are exempted from the section 269T:

  1. government;
  2. any banking post office savings bank or co-operative bank;
  3. any corporation established by a Central, State or Provincial Act;
  4. any Government company as defined in section 617 of the Companies Act, 1956
  5. other reported institutions.

Consequences of Violating the Provisions

Section 271E of Income Tax Act 1961 specifies that if a loan or deposit is refunded in contravention of the provisions of section 269T then a penalty corresponding to the sum of such loan or deposit repaid may be charged by the Joint commissioner.

Hence, everyone must properly manage their accounts and at the same time smartly save their taxes. For all your tax planning and saving needs consult the experts at H&R Block India.

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CA Madhuri Marne
Madhuri is a tax expert at H&R Block (India) with over a decade of professional experience. Having co-authored a book on economics for the ICAI exam, she now enjoys writing about tax-related topics in a simple and easy manner. Outside of work, Madhuri is passionate about teaching students who are appearing for professional exams.

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