The transactions in cash always played a major role in a Country’s economy and gives rise to black money practices. Thereby, Government with an intention to curb black money by reducing the scope of large size cash transactions in the economy or to promote digital economy introduced Section 269ST of the Income Tax Act, 1961. As per this section, no person can accept an amount in cash of Rs. 2 Lakhs or more.
Cash Transaction Limit- Section 269ST
Introduction of Section 269ST prohibits any person to receive the amount of Rs. 2 Lakhs and above in cash:
In aggregate from a person in a day; or
In respect of a single transaction; or
In respect of transactions relating to one event or occasion from a person.
Issues Emerge after the introduction of Section 269ST
The introduction of such a provision affected the financial entities in particular. Financial entities like Non-Banking Finance Companies (NBFCs) or Housing Finance Companies (HFCs) as the part of their business activities accept loan repayments in cash which is a matter of concern for them.
There was confusion that if a loan is a single transaction, then the instalments received in cash against such loan repayment would have to be aggregated for the purpose of this section. The financial entities are worrying that this section shall apply to single instalment repayment of loan.or to the entire repayment amount.
CBDT Clarification on Above Issue
After the introduction of this provision, the Central Board of Direct Taxes (CBDT) received representation from several financial institutions on the issue stated above. And in this context, department clarified that the limit is to be check for single instalment of loan repayment in cash and all the instalments paid in cash for a loan shall not be aggregated.
Therefore, NBFCs or HFCs will not have to aggregate all the instalments received in cash against a single loan transaction to see if it exceeds Rs. 2 Lakhs or not. Each instalment will be treated as a separate transaction.
Let’s understand the clarification with the help of table mentioned below:
Applicability of Section 269ST
Loan of Rs. 6 Lakhs – EMIs of Rs 50,000 paid over 12 months in cash
EMI of Rs. 3 Lakhs split into two halves and paid in cash over two days
EMIs against more than one loan transactions in a single day from a single person aggregating to more than Rs 2 Lakhs
Non- applicability of Section 269ST
Provisions of Section 269ST are not applicable, when cash of Rs. 2 Lakhs or more is received fromfollowing person:
Any banking company, post office saving bank or co-operative bank;
Any institution, association or body or class of institutions, associations or bodies notified by Central Government in its official gazette.
The Government has also introduced the penalty provision in case of violation of provisions contained in Section 269ST of the Act. That is if a person received any payment in cash in excess of the limit of Rs. 2 Lakhs, then he shall be liable to pay a penalty equal to the amount received in cash.
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