Introduction of Section 269ST:

Cash forms the base for any business or profession. There is always continuous cash cycle to keep a business moving and enter all daily transaction. Cash transaction many times means chances of tax evasion or generation of black money.

There are many sections under Income tax that governs the limits of cash transaction, let me highlight a few sections to elaborate on cash transaction and their respective limits.



  1. Section 40 of Income Tax under Income from Business and profession section:

Section 40A(2) and (3) are sections which checks tax evasion by disallowing cash transaction over a limit while computing income and loss from business and profession. The said section disallows any payment made exceeding Rs.10,000/­ (before 2017 budget the limit was Rs.20000)



  1. Section 269SS and section 269T

The section 269SS and 269T was introduced in 2015 during budget to curb black money.

  • As per section 269SS, a person shall not take or accept loan/deposit from other person for an amount more than Rs.20,000. In simple terms, no person would accept any cash loan or deposit for a amount exceeding Rs.20,000. There was also a recent amendment as on 1st June 2015, which imposes a person not to receive any cash payment more than Rs.20, 000 in case of transfer of immovable property.
  • As per section 269T, no loan would be repaid in cash for an amount exceeding Rs.20, 000. There was also a recent amendment as on 1st June 2015, which imposes a person not pay any cash payment more than Rs.20, 000 in case of transfer of immovable property.


Section 269ST

The Union Budget was presented by Indian Finance minister on 1st February 2017. Under the budget and Finance Bill, 2017 there was a preposition to introduce a new section 269ST in the Income Tax Act with effect from 01st April, 2017.

The provision of section 269ST was released to achieve the mission of Government, “to reduce generation and circulation of black money”.

As per section 269ST, No person shall receive an amount of three lakh rupees (Rs.3 Lakh) or more—

(a) in aggregate from a person in a day; or

(b) in respect of a single transaction; or

(c) in respect of transactions relating to one event or occasion from a person,

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


In simple terms, government has imposed a restriction on receipt of any amount of Rs.3 lakhs or more through modes other than the modes prescribed in that section (i.e. by cheque or bank draft or internet banking payment mode) in any way from a single person any one day or as per transaction or for any transactions per occasion / event etc.



Points to remember:


  • The new section 269ST doesn’t overpower all other sections. Thus all cash transaction limits defined by any other section in any other act or law remains the same. Thus this limit is levied on all other transaction which were not under purview of any other section, rules or provision.
  • The restriction of cash payment is applicable to all transactions irrespective of the fact that whether the receipt was made with or without consideration.



Let’s now try and break down the provision of section 269ST to understand the concept better.

  1. Rules of section 269ST to imposes the restriction of cash receipt from one party in a day:

Analysis:  The section applies to any transaction between single parties in a single day. It doesn’t apply to multiple entities and/or multiple transactions.

Thus the below are not violation under this section –

  • If Mr. Ram receives Rs.2 lakhs from Mr. Shyam in a day as a part payment of Rs.10Lac transaction then there is said to be no violation.
  • If Mr. Ram receives Rs.2 Lakhs from Mr. Shyam and also Mr. Ram receives Rs.2 Lakhs from Mr. Chandar in a day but the transaction or agreements between them were different thus there is no violation.
  • Also if Mr. Ram receives Rs.2 Lakhs from Mr. Shyam on one day and Rs.1 lakhs on any other day then there is no violation.


  1. Rules of section 269ST for restriction imposed on every single transaction :

Analysis: The restriction under this section is for single separate transaction.

Thus the below are not violation under this section –

  • If Mr. Ram bought goods from Mr. Shyam and there is a bill of Rs.5 Lakh, thus Mr. Shyam can pay only Rs.3 Lakh in cash against this bill.
  • Taking the above , if Mr. Ram buys goods for bill amount Rs.2 Lac and services for bill amount Rs.2 Lac from Mr. Shyam. Being same two party to transaction but the transactions are different thus Mr. Shyam can pay the complete Mr. 4 lac in cash.

The above rule also applies to all transaction which is joint transaction with many entities involved together. Thus no separate limits will be available in respect of each payee in respect of a single transaction.



  • Ram sold goods and services to Mr. Shyam and Mr. Chandar for Rs.4 lakhs and provided a consolidated. Thus this being single transaction, even if 2 different parties are involved but the cash can be paid only up to Rs.3 Lac against this consolidated bill. Thus there wont be any provision to receive Rs.2 Lac each against one bill.
  1. Rules of section 269ST for restriction based on single event or occasion or other transactions.

As per the provision of this section, any person can receive an amount less than Rs.3 lakhs in respect of all the transactions which are related to single event or occasion. Here under this section, event or occasion has not been defined but as per general understanding and normal definition, event and occasion may mean marriage, birthday, accident, tour or any other related events.

Example:  In case marriage of Mr. Ram, Mr. Ram can receive gifts in cash of an amount less than Rs.2 Lakh from each of his friend and relative.


Exemption provision from rules of section 269ST:

The provisions of this section shall not apply to—

(i) Any receipt by—

(a) Government;

(b) Any banking company, post office savings bank or co-operative bank;

(ii)Transactions of the nature referred to in section 269SS (thus all transaction of repayment of loan and transfer of immovable property would still be restricted to Rs.20,000 only);

(iii) Such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.

(iv)In the budget speech, it seems there was a preposition of the sections not to be applicable in case sale of agricultural produce by any person being an individual or Hindu Undivided Family. However it seems that the above provision has been omitted due to some mistake and later on may be included therein.


Penalty in case of contravention the provision of section 269ST:

A new section 271DA is proposed to be introduced under Income Tax laws and rules.

As per section 271DA of Income Tax Act, if a person receives any sum in contravention any of the provisions and rules of section 269ST, he shall be liable to pay penalty of amount 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. Ram receives cash payment of Rs.6 Lakh then Mr. Ram 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 Implication of the new provision of section 269ST

Government has proposed the introduction of this new section to curb black money and bring by tax transparency among transactions.

Thus below steps are to be followed to ensure 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

should be followed.

Thus there 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


This section is assumed to help stop black money circulation and keep stringent check on circulation of cash among individuals. The section would be operative from start of financial year i.e. on 1st April 2017.

All the companies and professionals must make necessary changes in their system to keep a check on all cash transaction to avoid penalty and prosecution under this provision . Author credit : Rohini Kumari