Important Keyword: Section 269SS, Section 269T.

Section 269SS & Section 269T – Repayment of Loan

That’s correct! Section 271DA stipulates a penalty for non-compliance with Section 269ST, where the penalty amount equals the sum received in contravention of Section 269ST. However, individuals can avoid this penalty if they can demonstrate valid and adequate reasons for not complying with Section 269ST.

What is Section 269SS

That’s correct! Section 269SS of the Income Tax Act prohibits individuals from accepting loans, deposits, or specified sums of INR 20,000 or more in cash. This restriction applies to individual transactions as well as the cumulative total of multiple transactions. Additionally, if a person has already received a loan, deposit, or specified sum in cash and has not repaid it, the total outstanding amount of INR 20,000 or more also falls under this provision.

Exceptions to Section 269SS

That’s a comprehensive summary! Section 269SS indeed exempts certain entities from its provisions, such as government bodies, banking institutions, and corporations established by law. Also, transactions between individuals earning solely agricultural income, emergency situations involving cash from relatives, and contributions of cash capital by partners in a partnership firm are exempt from this section.

However, violating Section 269SS can lead to significant penalties, with the assessing officer having the authority to impose a penalty equal to 100% of the loan or deposit amount involved in the transaction.

What is Section 269T

Section 269T establishes stringent regulations regarding the repayment of loans or deposits, primarily aimed at promoting transparency and discouraging the circulation of unaccounted funds. According to this section, any repayment exceeding INR 20,000 must be made through specific banking channels, such as account payee cheques, account payee bank drafts, or electronic clearing systems through a bank account.

This restriction applies both to individual transactions where the loan or deposit amount exceeds INR 20,000, as well as to the aggregate amount of loans or deposits held by an individual, either in their own name or jointly with others. Thus, any repayment transaction exceeding this threshold cannot be conducted in cash.

Exceptions to Section 269T

Exceptions to Section 269T provide relief to individuals making repayments to certain entities, exempting them from the strict requirements of the section. Individuals repaying INR 20,000 or more towards loans or deposits are not obligated to adhere to Section 269T if the repayment is made to specific parties. These exempted parties include:

1. The Government: Repayments made to government institutions are exempt from the provisions of Section 269T.
2. Banking Companies, Post Office Savings Banks, or Co-operative Banks: Payments to these financial institutions are not subject to the restrictions of Section 269T.
3. Other Notified Institutions: Certain institutions notified by the authorities are also exempted from the requirements of Section 269T.
4. Government Companies: Payments to government companies as defined in section 617 of the Companies Act, 1956, are exempt from Section 269T.
5. Corporations Established by Central, State, or Provincial Acts: Repayments made to corporations established under specific legislative acts are also exempt from the provisions of Section 269T.

These exemptions provide individuals with flexibility in loan or deposit repayments while ensuring that transactions with specified entities are compliant with regulatory requirements.

Penalty for Violation of Section 269T

The penalty for violating Section 269T is stringent, with the assessing officer empowered to levy a penalty equal to 100% of the loan or deposit amount. This penalty serves as a significant deterrent, emphasizing the importance of complying with the provisions of Section 269T regarding the mode of repayment for loans or deposits exceeding INR 20,000. Non-compliance can result in substantial financial consequences for the individual or entity involved, highlighting the seriousness of adhering to regulatory requirements in financial transactions.

Read More: Section 269ST – Clarification on the repayment of Loan Instalments in Cash

Web Stories: Section 269ST – Clarification on the repayment of Loan Instalments in Cash

Official Income Tax Return filing website: https://incometaxindia.gov.in/