Section 269SS of the Income Tax Act

Section 269SS of the Income Tax 1961

Mansi Bhatt | Updated: 28 February, 2022

Section 269SS of the Income Tax Act, 1961 deals with cash payment and repayment of loans and deposits.  This sections were introduced to curb the black money issue in India. Tax evasion is one of the serious problems in India. False cash transactions give birth to Black money which in turn increases tax evasion.

What is Section 269SS of the Income Tax Act, 1961?

A person cannot accept loan or deposit from another person otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if –
  • Amount of loan deposit is Rs. 20,000 or more, or
  • Sum total amount of loan, deposit, and the specified sum is Rs. 20,000 or more; Rahul wants to take a loan of Rs. 6,000, a deposit of Rs. 9,000 and advance of Rs. 7,000 from Vineet, he cannot accept it in cash because the total sum is 22,000.
  • A person has already got the loan or specified sum or deposit through the depositor; however, the amount of loan or specified sum, or deposit has not been paid back. In such a situation, if the specified sum, deposit, or loan is Rs. 20,000 or more.

Exceptions to Section 269SS of the Income Tax Act, 1961:

In case any specified sum, loan , or deposit is ‘accepted or taken from’ or ‘accepted or taken by’ any of the following entities i.e.

  • The Government;
  • Any banking company, post office savings bank or co-operative bank;
  • Any corporation established by a Central, State or Provincial Act; and
  • Any institution, association or body or class of institutions, associations or bodies notified in Official Gazette.

Then the above section does not apply to such entities

Further Exceptions to Section 269SS of Income Tax:

  1. A person earning only agriculture income accepts loan or deposit from another person also earning only agriculture income.
  2. Partners contributing cash capital into partnership firm.

Penalty on contravention of Section 269SS of Income Tax:

100% of the loan or deposit amount will be penalty that can be levied by the assessing officer.


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