Overview of Section 269SS of the Income Tax Act, 1961

Section 269SS governs receiving loans or deposits with exemptions available, violating it incurs a 100% penalty under Section 271D.

According to Section 269SS, individuals are prohibited from receiving deposits, loans, or any cash amount exceeding a specified limit in a single day, except for:

An account payee cheque
An account payee bank draft
An amount of money transferred using the electronic clearing system

The following scenarios are barred under Section 269SS:

Loan amount, deposit or a specified amount is higher than ₹20,000
Total amount of loan, deposit, or specified sum is more than ₹20,000 or above
You've received a sum exceeding ₹20,000 as a loan, deposit, or specified amount, but haven't repaid it yet

Exceptions Under Section 269SS

The exemptions that you get to enjoy u/s 269SS of the Income Tax Act are as follows:

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

The government
Any banking company, post office savings bank, or co-operative banks
A corporation formed by the central, state, or Provincial Act
A government company defined in clause (45) of Section 2 of the Companies Act, 2013
An institution, body, association, class of institutions and bodies, or associations notified in the Official Gazette

Section 269SS does not apply if individuals accept loans, deposits, or specified sums from the mentioned entities, or if these entities accept such payments from individuals.

Here are some exemptions u/s 269SS under the following conditions:

A person who earns only agricultural income accepts a loan or deposit from another person who also earns income from agriculture only
Accepting cash from a relative during financial crises is acceptable, provided it's not intended to evade taxes
Partners investing cash capital into their partnership firm

Applicability of Section 269SS

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 is ₹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 will 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 Section 269SS as NEFT is a mode of payment that is considered to be valid under this section.

Penalty for Violating Section 269SS

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

How much loan or deposit can be accepted in cash under Section 269SS?

The Section 269SS limit for receiving a loan, deposit, or a specified sum is ₹20,000.

What are the latest amendments made to Section 269SS?

The Finance Bill of 2023 proposed to amend Section 269SS. The amendment proposed to increase the limit of cash loans received from certain co-operative societies from ₹20,000 to ₹2 Lakhs.

What is the specified Section 269SS limit?

The specified Section 269SS limit is ₹20,000. If you receive a loan, deposit, or a specified sum higher than this limit, you will be in violation of the provisions of this section.

Who can initiate penalty provisions for violation of Section 269SS of the Income Tax Act?

If you violate Section 269SS, the Income Tax joint commissioner will impose a penalty under Section 271D. The penalty will amount to 100% of the amount that you receive in that transaction.

What are the exceptions to Section 269SS?

Exceptions to Section 269SS include transactions with the government, banking companies, post office savings banks, and cooperative banks. Loans or deposits from these entities are not subject to Section 269SS.

What is the maximum amount allowed under Section 269SS?

Under Section 269SS, the maximum cash amount for accepting loans or deposits is ₹20,000. For amounts above this limit, transactions must be made via cheque, bank draft, or electronic transfer to ensure compliance.

What is the tax audit clause under Section 269SS?

Section 269SS restricts accepting loans or deposits of ₹20,000 or more in cash. Transactions exceeding this limit must be made via account payee cheque, bank draft, or electronic transfer. Violating this clause can result in a penalty equal to the loan or deposit amount.