Tag: SECTION 269ST PENALTY

How much cash can you receive in one day to avoid an Income tax notice (2025)

To avoid an Income Tax notice in India in 2025 regarding cash transactions, it’s crucial to be aware of the following limits and regulations: The income tax authority attentively observes substantial cash transactions, prompting taxpayers to proceed with caution. Under Section 269ST of the Income Tax Act, receiving cash payments of ₹2 lakh or more in a single day for a singular transaction or related transactions on one occasion is prohibited. Exceeding this threshold could lead to penalties or legal repercussions.

It’s crucial for taxpayers to recognize that the Income Tax Department keeps track of significant cash transactions surpassing specific limits, which can lead to inquiries from tax officials.

According to Section 269ST of the Income Tax Act, no individual is permitted to accept a sum of ₹2 lakh or more in cash from another person in a single day, whether for one transaction or multiple associated transactions resulting from a singular event or occasion.

This regulation affects both individuals and entities, placing the onus of compliance on the recipient of the cash, not the payer.

Potential Penalties for Cash Transactions over ₹2 lakh

Engaging in cash transactions exceeding ₹2 lakh, or accepting that amount in a single day, could result in penalties. Tax expert Balwant Jain from Mumbai emphasizes that if a cash transaction of ₹5 lakh occurs, the recipient may face a penalty equivalent to that amount if the Income Tax Department identifies the violation during an audit.

Those who receive cash exceeding ₹2 lakh in violation of this regulation can incur a penalty equal to the amount of cash received. Notably, the payer bears no liability under these provisions.

Breakdown of Section 269ST

Section 269ST stipulates that no entity may accept over ₹2 lakh (the cash receipt ceiling) from an individual in any of the following circumstances: the total received from that person in a single day, in connection with a specific transaction, or related to transactions originating from a singular event or occasion.

Nonetheless, certain exceptions exist (for example, banks are exempt from this rule), meaning the applicability of these regulations largely depends on the nature of the transaction. Therefore, it is essential to verify that the cash transaction is compliant with the stipulated limits based on the proposed nature of the transaction.

Cash Transaction Limit under Income Tax

The following are the main income tax sections that pertain to cash transaction limit in India:

Section 40A(3) of Income Tax

Section 40A(3) of the Income Tax Act pertains to cash payment limit for expenditure made in cash. Under Section 40A(3), if payment for any expenditure of over Rs.10,000 is made in cash, then the expenditure will be disallowed under the Income Tax Act. Hence, it is important for all taxpayers to make any payment for the expense over Rs.10,000 through banking channels like debit card, account transfer, cheque or demand draft.

Section 43 of Income Tax

Under section 43 of Income Tax Act, if payment of more than Rs.10,000 is made by a taxpayer for the acquisition of an asset by cash, the expenditure would be ignored for the purposes of determination of actual cost of the asset. Hence, it is important for all taxpayers acquiring assets to make all payments to the seller through banking channels.

Section 269SS of Income Tax

Section 269SS prohibits a taxpayer from taking/accepting loans or deposits or a sum of more than Rs.20,000 in cash. All loans and deposits of more than Rs.20,000 must always be taken through a banking channel. Section 269SS of the Income Tax Act is however not applicable when accepting/taking loan or deposit from a person or entity mentioned below:

  • Government;
  • Any banking company, post office saving bank or co-operative bank;
  • Any corporation established by a Central, State or Provincial Act
  • Any Government company as defined in clause (45) of section 2 of the Companies Act, 2013
  • An institution, association or body or class of institutions, associations or bodies notified by Central Government in the official gazette.

Finally, if the person from whom the loan or deposit is taken and the person by whom the loan or deposit is accepted, are both having agricultural income and neither have any income taxable under Income Tax Act, then the provisions of Section 269SS will not apply.

Penalty under Section 269SS

Failure to comply with provisions of section 269SS could lead to a penalty equal to the amount of loan or deposit or specified sum accepted.

Section 269ST of Income Tax Act – Cash receipt limit

Section 269ST of the Income Tax Act provides that no person can receive an amount of INR 2 Lakhs or more in cash:

  • In aggregate from a person in a day;
  • In respect of a single transaction; or
  • In respect of transactions relating to one event or occasion from a person.

Provisions of Section 269ST are not applicable when cash of more than Rs.2 lakhs is received from the following persons:

  • Government;
  • Any banking company, post office saving bank or co-operative bank;
  • An institution, association or body or class of institutions, associations or bodies notified by Central Government in its official gazette.

Penalty under Section 269ST

As per section 271DA, in case of failure to comply with provisions of section 269ST, a penalty amount equal to the amount of receipt is payable.

Section 269T of Income Tax Act

Section 269T provides that any branch of a banking company or a co-operative society, firm or another person cannot repay any loan or deposit otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person, who has made the loan or deposit, if:

Provisions of section 269T are not applicable when the loan is repaid or deposit taken or accepted from below mentioned person:

  1. Government;
  2. Any banking company, post office saving bank or co-operative bank;
  3. Any corporation established by a Central, State or Provincial Act
  4. Any Government company as defined in clause (45) of section 2 of the Companies Act, 2013
  5. An institution, association or body or class of institutions, associations or bodies notified by Central Government in the official gazette.

Penalty under Section 269T

As per section 271E, in case of failure to comply with provisions of section 269T, penalty amount equal to the amount of loan or deposit repaid is payable.

INCOME TAX

Cash Transaction – Limit & Penalty – under Income Tax Act

Cash Transactions: Here Are The Limits And Penalties Under The Income Tax New Rules

New Section 269ST has been added to the Income Tax Act as a result of the measures taken by the Finance Act 2017 to curb black money. A cash transaction was restricted by Section 269ST and was only allowed to be worth up to Rs. 2 Lakh per day. No one will receive any sum of ₹2,00,000 or more, according to Section 269ST.

  • In total from an individual in a day
  • In relation to a single purchase
  • In relation to transactions from a person regarding a single event or occasion.

However, it has been made clear by the Central Board of Direct Taxes (CBDT) that withdrawals from banks and post offices are exempt from this cash withdrawal limit.Consequently, the following situations are exempt from the requirements of section 269ST:

  • Money received through the use of an electronic clearing system (ECS) out through bank account, an account payee bank draught, or a cheque made payable to an account payee.
  • any payment received from the federal government, a bank, a post office savings bank, or a cooperative bank.
  • transactions that fall under the definition of “nature” in section 269ST.
  • Such additional individuals, groups of individuals, or receipts as the Central Govt may specify by notification in the Official Gazette.

Post Office Withdrawal

  • Department of India-operated post offices with the help of an ATM, Post enables withdrawals from Post Office savings accounts.
  • A post office or ATM will only allow you to withdraw a total of ₹25,000 in cash in a single day, with a maximum of ₹10,000 per withdrawal.
  • Five transactions, both financial and non-financial, are allowed at no cost each month by the post office. Further than the free transactions, there is a GST-compliant fee of ₹20.
  • It is acceptable to withdraw money from ATMs of other banks; in metro areas, this is limited to three free withdrawals; in non-metro areas, this is limited to five withdrawals. For transactions above those that are free, a fee of ₹20 plus GST is imposed.

Bank Withdrawal

The deposited amount may be taken out of both the savings account and the bank account using a chequebook, a withdrawal slip, or an automated teller machine that accepts debit cards. The maximum cash withdrawal amount is adjusted from different banks and is also based on the card type being used. 

It varies depending on the bank from ₹10,000 to ₹50,000 per day. The State Bank of India did, however, provide the transactional information listed below.

  • The majority of banks have set a limit on cheque book withdrawals at 60 per half-year.
  • The maximum amount that can be deducted from the current account each week is ₹1,000,000, while a total of ₹ 24,000 can be withdrawn from the savings account each week.
  • For salary accounts, ATM withdrawals allow a daily limit of ₹10,000 and unlimited free transactions, compared to 3 withdrawals from other ATMs that incur a fee of ₹20 plus GST per month.

Income Tax Cash Transaction Limit

The principal sections of income tax that deal with the cash transaction limit are as follows: 

  • Sections 40A(3) and 43 – Affects Cash Payment 
  • Concerns Cash Receipts: Sections 269SS and 269ST 
  • Reimbursement of Certain Loans and Deposits is Affected by Section 269T

Income Tax Section 40A(3)

The Income Tax Act’s Section 40A(3) addresses the maximum amount of cash that can be exchanged in a transaction. According to Section 40A(3), the Tax Act of India will disallow any expenditure over ₹10,000 that is paid for in cash. It is crucial that all taxpayers use banking methods like a debit, account transfer, check, or demand draft when making any payments for expenses that total more than ₹10,000.

Income Tax Section 43

If a taxpayer spends more than ₹10,000 to purchase an asset in cash, section 43 of the Income Tax Act states that the expenditure is disregarded when calculating the asset’s actual cost. It is crucial that all taxpayers who purchase assets send the seller all payments through banking channels.

Income Tax Section 269SS

A taxpayer is not permitted to accept or take loans, deposits, or payments in cash totaling more than ₹20,000 under Section 269SS. More than ₹20,000 in loans or deposits must always be obtained through a banking channel. 

To the contrary, when accepting a loan or deposit from one of the following individuals or organisations, Section 269SS of something like the Income Tax Act is indeed not applicable:

  • The Government
  • Any bank, co-operative bank, or post office savings institution;
  • Any business that was created by a federal, state, or provincial law
  • Any government-related organisation as defined by clause (45) of section 2 of the Companies Act of 2013.
  • a group of institutions, organisations, or bodies that the central government has officially announced inside the official gazette.

Last but not least, the clauses of Section 269SS would not apply if both the person making the credit or deposit and the person accepting it have agricultural income nor had any other income subject to taxation under the Income Tax Act.

A penalty equivalent to the value of the loan, deposit, or specified total amount accepted could be imposed if section 269SS requirements are not followed.

Act on Income Taxes, Section 269ST

No person is permitted to receive in cash an amount equal to ₹2 Lakh or more, according to Section 269ST of said Tax Act of India.

  • In regards to a single transaction, 
  • in total from a person in a day, 
  • in regards to transactions from a person pertaining to a single event or occasion.

When receiving cash from any of the following sources totalling more than ₹2 lakh, Section 269ST’s provisions are not applicable:

  • Administration 
  • any bank, co-operative bank, or post office savings institution;
  • an organisation, association, body, or group of organisations that the Central Government has announced within the official gazette.

Section 269ST Penalty

In accordance with section 271DA, a fine equal to the value of the receipt is due if the requirements of section 269ST are not followed.

Income Tax Act, Section 269T

According to Section 269T, a branch of a bank, a cooperative society, a business, or another individual is prohibited from repaying a loan or deposit in any other way than with a check or bank draft made out in the borrower’s name. This prohibition applies in the following situations:

  • The line of credit or deposit is at least ₹20,000 when interest is added, or 
  • The sum of all loans or deposits that person has on hand, whether they are in his name alone or together with another person, are at least ₹20,000 when interest is added.

Section 269T Penalty

According to section 271E, a penalty equal to the loan or deposit amount repaid is due in cases where the requirements of section 269T are not met.