Objective: To discourage large cash transactions and promote digital payments.
1. Key Provisions of Section 269T
1. Prohibited Transactions (Cash Limit: ₹2 Lakhs or More)
No person shall receive in cash (from a single person in a day/transaction/event):
- Aggregate amountof ₹2 lakhs or more for:
- Loan/deposit(including repayment)
- Transfer of immovable property(even if sale fails)
- Sale of goods/services(business transactions)
Example:
- Accepting ₹2.5 lakhs cashfor selling a car → Violation
- Taking ₹1.9 lakhs cash + ₹10,000 UPI → No violation(since single mode < ₹2L)
2. Exceptions (Cash Allowed Even ≥ ₹2 Lakhs)
The restriction does not apply to:
- Government, banks, post offices, cooperative banks
- Transactions under Agriculturists’ exemption(if both parties have only agricultural income)
- Capital contributions by partners to a firm
- Loans from RBI-regulated NBFCs
3. Penalty for Violation (Section 271DA)
- 100% of the received cash amount
- Example:If ₹3 lakhs received in cash → ₹3 lakhs penalty
- Who can impose penalty?Only a Joint Commissioner or higher authority
4. How to Avoid Penalty?
- Use banking channels(cheque/RTGS/NEFT/UPI) for transactions ≥ ₹2L
- Prove “reasonable cause”(e.g., bank failure, medical emergency) under Section 273B
5. Comparison with Sections 269SS & 269T
| SECTION | APPLIES TO | CASH LIMIT | PENALTY SECTION |
| 269SS | Accepting loans/deposits | ₹20,000+ | 271D (100%) |
| 269T | Repaying loans/deposits | ₹20,000+ | 271E (100%) |
| 269ST | Receiving any payment (sale, loan, property) | ₹2 lakhs+ | 271DA (100%) |
6. Practical Examples
| CASE | TRANSACTION | VIOLATION? | REASON |
| Car dealer receives ₹2.5 lakh in cash from a customer in one day | ₹2.5 lakh in cash, one day | Yes | Amount exceeds limit from one person in one day |
| Event manager accepts ₹1 lakh (catering), ₹1.5 lakh (décor), ₹1.5 lakh (tent) in cash for same wedding on different dates | ₹1 lakh + ₹1.5 lakh + ₹1.5 lakh cash | Yes | Aggregate for single occasion exceeds ₹2 lakh from one person |
| Shop owner receives ₹1.6 lakh each on 3 bills from one customer on one day | ₹4.8 lakh total in cash, different bills, one day | Yes | Aggregate on a single day from one customer exceeds limit |
| A receives ₹1,11,000 on marriage day and ₹1,51,000 at reception from same uncle | ₹2,62,000 total cash for same occasion | Yes | Aggregate received for single event/occasion exceeds limit |
| Car dealer receives ₹1.5 lakh in cash from Customer A and ₹50,000 in cash from Customer B same day | Separate persons, < ₹2 lakh each | No | Each receipt from a single person < ₹2 lakh |
| A person sells items worth ₹3 lakh via single bill, receives ₹1.5 lakh cash on day 1, ₹1.5 lakh cash on day 2 | Same transaction but split over days | No | Each receipt per day < ₹2 lakh, split payments |
| Received ₹1,000 each in cash from 220 guests at a wedding | ₹2,20,000 total, but max ₹1,000 per person | No | No individual receipt exceeds limit per person |
2. Penalty for Violating Section 269ST (Under Section 271DA)
Section 269ST of the Income Tax Act, 1961, restricts cash receipts of ₹2 lakh or more in a single transaction, from a single person in a day, or for a single event. Violations attract a 100% penalty under Section 271DA. Here’s a detailed breakdown:
1. Penalty Imposition
- Amount: Equal to the cash received in violation (e.g., accepting ₹3 lakh in cash → ₹3 lakh penalty) .
- Authority: Levied by the Joint Commissioner(or Assessing Officer post-2025 reforms) .
- Trigger: Applies to the receiverof cash, not the payer .
2. Exceptions to Penalty
No penalty is imposed if the recipient proves “good and sufficient reasons”, such as:
- Genuine emergencies(e.g., medical crisis, banking failure) .
- Transactions recorded in bookswith verified party identity .
- Technical breacheswithout tax evasion intent (e.g., split invoices for genuine purchases) .
Exempt Entities:
- Government, banks, post offices, and notified institutions .
3. Judicial Precedents
- Sujata Farms Case: Penalty waived as the transaction was not inherently violative .
- Hindustan Steel Ltd. vs. State of Orissa: Penalties not imposed for “technical or venial breaches” .
4. Procedural Aspects
- Show-cause notice (SCN): Need not specify penalty amount upfront .
- Appeal: Can be challenged before CIT(A) if unjustified .
5. Proposed Changes (Clause 451, 2025 Bill)
- Section 271DAmay be replaced by Section 271FAB, shifting penalty authority to Assessing Officers.
- Penalty quantum remains 100%, but procedural safeguards are strengthened.
6. Practical Examples
| CASE | TRANSACTION | VIOLATION? | PENALTY AMOUNT | EXPLANATION |
| Sold goods worth ₹3,50,000, received ₹2,70,000 in cash and balance by cheque | ₹2,70,000 in cash | Yes | ₹2,70,000 | Cash receipt exceeds ₹2 lakh from single person in one day |
| Received ₹1,20,000 cash on day 1 & ₹1,50,000 cash on day 2 against same invoice (total ₹2,70,000) | ₹2,70,000 in cash | Yes | ₹2,70,000 | Aggregate cash for single transaction/invoice > ₹2 lakh |
| Received ₹3,30,000 cash from customer for two invoices on one day | ₹3,30,000 in cash | Yes | ₹3,30,000 | Cash received from same person in one day > ₹2 lakh |
| Accepted ₹2,10,000 in cash from a wedding guest at one event | ₹2,10,000 in cash | Yes | ₹2,10,000 | Cash > ₹2 lakh for a single event occasion |
| Accepted ₹2,50,000 in cash from multiple guests, but each gave less than ₹2 lakh | Each amount < ₹2 lakh | No | None | Penalty not applicable if per person cash does not exceed ₹2 lakh |
