Section 269SS of the Income Tax Act

Financial stability is of utmost importance to leading a comfortable life. However, at times, you may need funds to sail through a period of financial hardship. At such a time, availing of a loan may help you deal with finances relating to:

• Child’s educational fees

• Renovation of a house

• Medical Emergency

 

However, you must be aware of the provisions under Section 269SS of the Income Tax Act of 1961, as it regulates loan repayment and cash deposits. Read on to know more about Section 269SS and how it may impact your loan and deposit prospects.

As per Section 269SS, an individual is barred from accepting any deposit, loan, or any other amount of money from another person in cash, except for:

• An account payee cheque

• An account payee bank draft

• An amount of money using the electronic clearing system

 

You can accept the sum of money from another person if: 

1. The amount of loan, deposit or a specified amount is higher than ₹20,000.

2. The total amount of loan, deposit, or specified sum is more than ₹20,000 or above. 

3. You have received a loan, deposit, or specified sum from the depositor. However, the said amount has not been paid back and the total of these amounts is higher than ₹20,000.

4. The total of the three aforementioned points is ₹20,000 or more. Hence, a person cannot accept a loan or deposit of ₹20,000 or more in cash from another person.

The exemptions that you get to enjoy under Section 269SS are as follows:

 

Any loan, deposit, or specific amount taken from or taken by the following entities is exempted:

1. The government

2. Any banking company, post office savings bank, banking organisations, or cooperative banks

3. A corporation formed by the Central, State, or Provincial Act

4. A government company as defined in clause (45) of Section 2 of the Companies Act, 2013

5. An institution, body, association, class of institutions and bodies or associations notified in the Official Gazette

• If a person accepts any loan or deposit or specified sum from the above entities, or these entities accept the same from a person, the provisions of Section 269SS won't be applicable.

 

Section 269SS also provides exemptions under the following conditions:

1. A person who earns only agricultural income accepts a loan or deposit from another person who also earns income from agriculture only.

2. Receiving cash from a relative during financial emergencies. However, the intention shouldn't be to evade taxes.

3. Partners investing cash capital into their partnership firm.

To better understand the applicability of Section 269SS of the Income Tax Act, look at the instances given below:

Case 1

If you get a loan of ₹10,000, a deposit of ₹5,000, and an advance of ₹8,000, you cannot accept it in cash. This is because the total becomes ₹23,000.

Case 2

If you get a loan of ₹10,000 from one person today and after 3 months, you repay ₹4,000. Now, after a month, if you take another ₹16,000 as a loan from that person, it will be in violation of the provisions of Section 269SS.

 

Since the remaining loan amount to be repaid will be higher than ₹20,000, you cannot accept the second instalment of the loan.

Case 3

If you accept a loan of ₹10,000 from person 1 and ₹15,000 from person 2, the total amount would be more than ₹20,000. But, this would not be in violation of Section 269SS as the sum has not been taken from a single person.

Case 4

Consider that you take a loan of ₹10,000 in cash from a person. On the same day, you take a loan of ₹14,000 using NEFT from the same person. This would not be considered a violation of Sec 269SS as NEFT is a mode of payment that is considered to be valid under this section.

Section 271D mandates a penalty if a person receives a loan, deposit, or a sum from another person in violation of Sec 269SS. According to this section, the IT joint commissioner can impose a penalty amount to the entirety of the loan, deposit, or the sum received.

 

In conclusion, Section 269SS of the Income Tax Act regulates the amount that you can receive as a loan, deposit, or a specified sum. The Section 269SS limit for receiving such an amount is ₹20,000.

 

However, there are certain exemptions that you get to avail of under this section. For instance, if you receive such a sum from any entity mentioned under its provisions, you may get an exemption.

 

In case you violate the provisions of the aforementioned section, you will attract a penalty from the joint commissioner of the Income Tax Department. Section 271D of the Income Tax Act of 1961 mandates the imposition of a penalty amounting to 100% of the sum that you receive.