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Most try to find ways to avoid paying taxes. However, if it is done using unfair means or by concealing information/income from tax authorities, such avoidance is termed tax evasion, which is a serious criminal offense. If caught, the person may have to face an enormous penalty as well as imprisonment. To avoid these consequences, people found ways to explain the transactions. One such common explanation was offered in the case of unaccounted cash. If, during raids, the tax authorities discovered unaccounted cash, the person would escape the consequences by explaining the source of such cash to be a loan or deposit from friends and family, as there was no limit on the amount of such loan/deposit in the Income Tax Act, 1961('the Act'). To bring such transactions within the scope of the Act and curb the movement of black money, sections 269SS and 269T were introduced.
This article helps break down and explain these sections in detail.
A person can take or accept a loan or deposit or any specified sum(*) from any other person (hereinafter referred to as 'depositor') only through the specified modes of payment if the amount exceeds certain limits.
*Specified sum: means any amount of money receivable such as advance, etc., regarding the transfer of immovable property, irrespective of whether such transfer takes place or not.
a. Section 269SS does not apply to:
- any deposit or loan or specified sum accepted or taken by, or
- any deposit or loan or specified sum accepted or taken from the specified entities, i.e. such entities may take, accept or give such said amounts, without any limits, through any mode of payment, including cash from/to any person. Such specified entities are as follows:
b. A person who earns only agricultural income takes a loan, deposit, or specified sum from any other person who earns only agricultural income.
c. Contribution of capital by partners into the partnership firm in the form of cash
d. Receipt of cash from relatives during emergencies where the intention of the person is not tax evasion.
e. Certain judicial precedents which have held that section 269SS shall not apply to the under-mentioned cases:
This section prohibits a person from repaying the loan or deposit or any specified sum in cash if:
In brevity, this section provides that no person can repay the loan, deposit or any specified sum in cash if the amount is INR 20,000 or more in cash. The payment is required to be made through the same modes specified earlier.
Certain entities may take, accept, or give such said amounts through any mode of payment, including cash from/to any person. i.e., section 269T does not apply to them. Such specified entities are as follows:
As per sections 271D and 271E, the exact amount of loan or deposit (i.e., 100%) taken or accepted shall be the amount of penalty for contravention of sections 269SS and 269T, respectively.
According to section 273B, no penalty shall be imposed under sections 271D & 271E where any person violates sections 269SS and 269T due to any reasonable cause. Certain judicial judgments have held that no penalty shall be levied in the following cases:
Clause 31 of Form 3CD (tax audit report) requires reporting of the transactions specified under sections 269SS and 269T if such transactions exceed the specified limit thereunder. The tax auditor must report the following particulars under the below-mentioned sub-clauses:
Section 269SS is a provision under the Income Tax Act, 1961, that regulates the acceptance of certain loans and deposits by individuals, Hindu Undivided Families (HUFs), and other entities.
Section 269SS applies to transactions where an individual, HUF, or any person accepts a loan or deposit in cash. It also covers any transactions involving an amount exceeding Rs. 20,000.
No, it is not permissible to accept loans or deposits in cash if the amount exceeds Rs. 20,000. Any such transaction should be done through banking channels or by other permissible modes.
If a transaction that violates Section 269SS is discovered, it may result in penalties under Section 271D, which is usually a penalty equal to the amount accepted in cash.
Section 269T is another provision under the Income Tax Act, 1961, which regulates the repayment of certain loans and deposits by individuals, HUFs, and other entities.
Section 269T applies to transactions where an individual, HUF, or any person makes repayments of loans or deposits in cash. It also covers transactions where the repayment amount exceeds Rs. 20,000.
No, it is not permissible to make repayments of loans or deposits in cash if the amount exceeds Rs. 20,000. Repayments should be made through banking channels or by other permissible modes.
Violating Section 269T can result in penalties under Section 271E. The penalty is typically equal to the amount of the loan or deposit repaid in cash.
Yes, there are certain exceptions and specific situations where these sections do not apply, such as transactions with government institutions, banks, or specific cooperative credit societies, or transactions where the nature and circumstances justify the use of cash.
Sections 269SS and 269T are designed to promote transparency and discourage the use of unaccounted cash in financial transactions. They are important for maintaining the integrity of financial dealings and ensuring proper documentation.
