section 269st
Section 269SS – Introduction of New Provisions
April 26, 2018
Section 64 of Income Tax Act
April 26, 2018
section 269ST

Section 269ST – Introduction and Its Significance

Last Update Date : October 24, 2018

section 269ST

After series of events, Black Money came under the radar of our Government and has started to enact provisions to control the same. When earlier attempts to curb black money did not work in a manner that was wanted, to improve conditions the government of India launched Section269ST to provide cashless transactions, to keep a track i.e. transparency and disclosure of different cash sources in case of tax evasion and black money, which will be reviewed in this guide.

Introduction of Section 269ST

The Finance Act, 2017 introduced section 269ST in the Income Tax, 1961w.e.f. 1st April 2017. Under sections 269SS and 269T the effectiveness to control the black money was not considerable, so the Government made provisions to restrict cash transactions.  Section 269ST specifies that no person shall receive an amount of two lakh rupees or more:

  1. in total from a person in a day; i.e. A person can receive amount of Rs. 1,50,000 or any amount under 2 lakhs in cash.
  2. in respect of single transaction; i.e. If a person splits amount in various invoices of smaller values, then the person on receiving end cannot accept the same.
  3. in respect of transactions relating to one event or occasion from a person; i.e. If a person receives cash from various small and different transactions but is related to a single event or occasion, then also the person receiving cannot receive the cash otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account

Exceptions from Section 269ST

  1. Provided that the provisions of this section shall not apply to any receipt by:
    1. government;
    2. any banking company, post office savings bank or co-operative bank;
  2. transactions of the nature mentioned in section 269SS;
  3. such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.

Penalty in Case of Contravention of Provisions

A new section 271DA is introduced under Income Tax laws and rules.  As per section 271DA of Income Tax Act, if a person receives any sum in contravention of any of the provisions and rules of section 269ST, he/she will be accountable to pay penalty of total sum equal to the amount of such receipt received in cash.

Thus, in simple terms the penalty amount would be 100% of the amount received in contravention of this section.

Example: In case Mr. Murtaza receives cash payment of Rs.6 Lakh then Mr. Daksh needs to pay Rs.6 Lakh as penalty under this section.

Note: There would be no penalty imposed if such person provides good and sufficient reasons for the contravention.

Practical Implications

Government has introduced this new section to keep a check on black money and introduce tax transparency among transactions.  Thus, the following steps are to be followed to certify one is compliant under this section:

  • All transaction must be verified, whether the transactions are joint or single (separate ones)
  • All payment should be matched with each transaction.
  • Cash payment must be strictly verified against:
    • Each bill or transaction or event (Payment received against which bills and transaction)
    • Payment made on each date (Cash payment made each day)
    • Payee details (who is paying and against which bill on which date)
  • In simple terms, whether the transactions are related or not related then:
    • the limit of single transaction along with
    • per day
    • per entity limit

Thus, there are three level of checks to be followed for each cash payment:

  1. Daily limit check
  2. Transaction or each bill check
  3. Entity or paying party check

Now with increased attention over cash transactions and various activities of people/companies has skyrocketed their tax related problems. Hence it is necessary to manage and plan taxes so that you do not face the consequences of violation. To effectively file your taxes, enlist the tax experts at H&R Block India,

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