Section 269ST of Income Tax Act: Penalty on cash receipt of more than 2 lakh

What is Section 269ST?

The government of India keep bringing various measures to determine the cash payment limit and boost digital payments. As the Section 269ST imposed restrictions on a transaction, the cash transaction limit per day is limited to Rs.2 Lakhs per day. Section 269ST states that no person shall receive an amount of Rs 2 Lakh or more (cash receipt limit):

• 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.

However, the Central Board of Direct Taxes (CBDT) has clarified that this cash withdrawal limit does not apply for withdrawals from Banks and Post offices.This section concerns only those people who are receivers. It means, receivers of the cash will be the one 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 a jewelery from you of 3 lakh in cash. Then the penalty will be on you as you are the receiver. Even if you try to split the bill, the entity will remain same.

On the other hand, it is okay if the amount is received from two different person and the amount received from both is less than the specified limit. Suppose from one person you receive Rs. 1.75 lakh for a jewelry and from another person you receive cash of Rs. 50,000 for other item. Then it's not a violation of section.

Now let's move to part (b)

b) In respect of a single transaction

You probably are aware of contractors and that they receive payment only when some percentage of their work gets complete. Their most of the payment is cash receipt based and even they require cash regularly for wages, material, day to day needs etc. Well now in a single contract they can't receive cash more than Rs. 2 lakh, even if the contract is of 1 year or 5 years. All the transactions has to be done either by draft, cheque or bank to bank electronic transfer.

And let's understand the last part (c)

c) In respect of transactions relating to one event or occasion from a person

If you're an Indian then you are surely aware of the weddings and the part cash plays in it. Well occasions or events like that will also come under these section. Since it is not specifically mentioned that means that it's applicable everywhere. Hence cash gifts received on any event, that were a part of exempt income, may also be taken into consideration under this section.

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Exclusions From the Scope of Section 269ST

This section will not apply to-

• Government
• any banking company
• post office savings bank
• co-operative bank
• other persons/receipts as may be notified
• Transactions referred to in section 269SS (attracted when we accept loan from any person) will be excluded from the scope of the new section 269ST.

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Penalties under Section 269ST

Under Section 269ST, the penalty is equivalent to the amount received in cash that exceeds the prescribed limit i.e. 100% of the amount. This means that if you don't follow the rule mentioned in Section269ST and if cash receipt of more than 2 lakh or more is received from a single person in a single day, the penalty imposed will be the amount as the cash received in violation of the section. This penalty is implied to all individuals and entities like businesses, professionals, and other organizations.

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Withdrawal of cash from Banks

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:

• Chequebook Withdrawals: Most banks restrict withdrawals using chequebooks to 60 transactions per half-year.
• Account-Specific Withdrawal Limits:
  • For current accounts, a maximum of ₹1,00,000 can be withdrawn per week.
  • For savings accounts, the withdrawal limit is capped at ₹24,000 per week.
• ATM Withdrawals:
  • The daily withdrawal limit is ₹10,000.
  • Salary account holders enjoy unlimited free ATM transactions.
  • Other account holders are allowed three free transactions per month from non-SBI ATMs, after which a fee of ₹20 plus GST is charged per transaction.

Withdrawals from Post Office Accounts

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:

• Withdrawal Limits:
  
  • A maximum of ₹25,000 can be withdrawn per day.
  • Each transaction is capped at ₹10,000.
• Free Transactions:
  
  • Post Office account holders are allowed up to five free transactions per month. These include both financial transactions (cash withdrawals) and non-financial transactions (such as balance inquiries or statement requests).
  • Beyond the free transactions, a fee of ₹20 plus GST is charged per transaction.
• Withdrawals from Other Bank ATMs:
  
  • Account holders are permitted up to three free transactions per month in metro cities and five free transactions in non-metro cities.
  • For transactions exceeding these limits, a fee of ₹20 plus GST is applicable.

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