Credit Card Spends, FD Interest, Property Deals, Stocks Ensure Proper Reporting in Your ITR Avoid Notices, Penalties & Scrutiny
Section 269ST of the Income Tax Act restricts the receipt of ₹2 lakh or more in cash from a person in a day, for a single transaction, or for transactions relating to one event or occasion. Introduced to curb unaccounted money and promote transparent financial transactions, the provision applies to individuals, businesses, and other entities receiving cash beyond the prescribed limit. Non-compliance can attract a penalty equal to the amount received in cash, making it important to understand the rules, exceptions, and reporting requirements under Section 269ST.
Under Section 269ST of the Income Tax Act, 1961, if you receive more than ₹2 lakh in cash from a single person in one transaction or multiple transactions related to the same event, you could be hit with a penalty equal to the transaction amount.
Section 269ST of the Income Tax Act restricts individuals and entities from receiving cash of Rs.2 lakh or more in a single day from a single source. The liability of restricting such transactions falls on the receiver and not the payer.
You cannot accept ₹2 lakh or more in cash in:
However, the Central Board of Direct Taxes (CBDT) has clarified that this cash withdrawal limit does not apply to withdrawals from Banks and Post offices. This section concerns only those people who are receivers. It means receivers of the cash will be the ones getting affected, not the person who gives it.
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 jewelery worth Rs.3 lakh in cash from you. Then the penalty will be on you as you are the receiver. Even if you try to split the bill, the entity will remain the same.
On the other hand, it is okay if the amount is received from two different people and the amount received from both is less than the specified limit. Suppose from one person you receive Rs. 1.75 lakh for jewelry and from another person you receive cash of Rs. 50,000 for a different item, then it will not be considered violation of the section.
Now let's move to part (b)
b) In respect of a single transaction
Cash receipts of Rs.2 lakh or more from a single transaction are not allowed under section 269ST. If Sachin sells goods worth Rs.3 lakhs to Sehwag through a single bill and receives the amount in cash. If he receives Rs.1.5 lakhs on day 1 and Rs.1.5 lakh on day 2, then section 269ST will be violated, because both the payments are tied to the same purpose/transaction.
c) In respect of transactions relating to one event or occasion from a person
Cash transactions or receipts related to a single event or occasion cannot exceed ₹2 lakh.
For example, Dhoni receives an order for catering, decoration, and tent services for Virat's wedding. He accepts ₹1,00,000 in cash for catering, ₹1,50,000 for decoration, and ₹1,50,000 for tent services. Even if he receives the payments on different dates, the total cash transactions exceed ₹2 lakh for the same occasion—Virat's wedding—violating Section 269ST.
A recent case says:-
A businessman received ₹5 lakh per month for six months from a property buyer, keeping each payment below ₹2 lakh. He thought he was safe. But the tax authorities linked all payments to the same transaction and imposed a ₹30 lakh penalty!
This section will not apply to-
Under Section 269ST, the penalty is equivalent to the amount received in cash that exceeds the prescribed limit. This means that if you don't follow the rule mentioned in Section 269ST and if cash receipt of 2 lakh or more is received from a single person in a single day for a single event, the penalty imposed will be the amount as the cash received in violation of the section. This penalty is applicable to all individuals and entities like businesses, professionals, and other organizations. It also applies to farmers taking cash of Rs.2 lakh or more for their produce in a single day.
After the introduction of Section 269ST, there was panic among people that what if they want to withdraw cash from bank? Money deposited in both savings and current accounts can be withdrawn using a chequebook, withdrawal slip, or an ATM through a debit card. The cash withdrawal limit varies between banks and depends on the type of card used, typically ranging from ₹10,000 to ₹50,000 per day. Below are the transaction details as notified by the State Bank of India:
The Department of India Post facilitates withdrawals from Post Office savings accounts through both Post Office counters and ATMs. Below are the key details regarding withdrawal limits and charges:
The following sections of the Indian income tax act specifies the cash transaction limit in India -
If you are withdrawing any amount in cash from the bank then there is no restriction. It has been officially announced that withdrawing cash from a bank will not be considered in it.
As per Section 269ST of the act, any individual cannot receive an amount exceeding Rs.2 lakhs in a single day, from a single person for the same item. In this case, the section will be violated as the individual receives a total amount of Rs.1 lakh in a single day and from a single person.
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.
If the cash received is more than Rs.2 lakhs, and Section 269ST is violated, then the penalty equals to the amount received by the receiver.
No. Receiving ₹2 lakh or more in cash from a relative may attract Section 269ST, even if the amount qualifies as a tax-exempt gift under the Income Tax Act. The exemption available for gifts from specified relatives does not override the cash receipt restrictions under Section 269ST.
No. Receiving ₹2 lakh or more in cash in connection with the sale of a property may violate Section 269ST. Property transactions should ideally be completed through account payee cheque, bank draft, electronic transfer, or other prescribed banking channels.
No. Splitting a payment into smaller cash installments may not help avoid Section 269ST. The provision applies not only to receipts from a person in a day but also to receipts relating to a single transaction or a single event or occasion. If the total cash received exceeds the prescribed limit, the transaction may still be covered under the section.
Yes. Section 269ST applies when the amount received in cash is ₹2 lakh or more. Therefore, receiving ₹1.99 lakh in cash is generally permitted, provided it does not form part of a larger transaction or event that results in a violation of the section.
No. Section 269ST restricts only cash receipts. Payments received through UPI, NEFT, RTGS, IMPS, account payee cheque, account payee bank draft, or other prescribed electronic modes are not covered under this provision.
Yes. Section 269ST may apply to cash gifts received in connection with a wedding. If a person gives cash of ₹2 lakh or more, or multiple cash payments related to the wedding exceed the prescribed limit, the recipient may be liable under Section 269ST.
The recipient of the cash amount is liable for the penalty. The person making the payment is not penalized under Section 269ST. Therefore, individuals, businesses, professionals, trusts, and other entities receiving cash must ensure compliance with the prescribed limits.
Under Section 271DA, the penalty is generally equal to the amount received in contravention of Section 269ST. For example, if a person receives ₹3 lakh in cash in violation of the provision, the penalty may also be ₹3 lakh. However, no penalty may be imposed if the recipient can demonstrate a good and sufficient reason for the failure to comply.
