Section 269ST

Section 269ST of the Income Tax Act, 1961 prohibits any person from receiving cash of Rs 2 lakh or more from a single person in a day, from a single transaction, or from transactions relating to a single event or occasion. It was introduced in the 2017 Union Budget to curb black money and encourage digital payments.

What Is Section 269ST?

Section 269ST puts a ceiling on cash receipts. The restriction applies when:
– A single person pays Rs 2 lakh or more in cash in a single day
– A single transaction involves Rs 2 lakh or more in cash
– Multiple transactions from one person related to a single event or occasion total Rs 2 lakh or more in cash

The restriction is on the RECIPIENT: the person receiving cash is liable for the penalty, not the payer.

Who Does Section 269ST Apply To?

The restriction applies to all persons except:
– Government offices
– Banking companies, post offices, and cooperative societies engaged in banking
– Transactions specifically exempted under Rule 6ABBA (such as loans from scheduled banks or transactions involving death, accident, or severe illness)

Penalty for Violation

Section 271DA imposes a penalty equal to the amount received in violation. For example, if a business receives Rs 5 lakh in cash in one day from one person, the penalty is Rs 5 lakh (100% of the cash received).

Practical Examples of Section 269ST

**Prohibited:**
– A jeweller receives Rs 3 lakh cash from a customer for a single purchase
– A real estate agent receives Rs 2.5 lakh cash on a single day from one client for multiple services
– A contractor receives Rs 2 lakh or more in cash against a single contract

**Allowed:**
– Multiple payments of Rs 1.5 lakh each on different days from the same person for different transactions
– Cash withdrawals from banks are not covered
– Receipt of agricultural income (with certain conditions)

Practical Example

Ramesh runs a furniture shop. A customer wants to buy furniture for Rs 3 lakh and offers to pay in cash. Ramesh cannot accept this cash payment under Section 269ST. He must insist on a cheque, bank transfer, or digital payment. If he accepts the cash, he faces a Rs 3 lakh penalty.

Key Takeaways

– Section 269ST prohibits receiving Rs 2 lakh or more in cash from a single person in a day or a single transaction
– The penalty under Section 271DA is 100% of the cash amount received
– The restriction applies to the recipient; government bodies and banks are exempt
– Businesses must maintain records and ensure large transactions are through banking channels
– Section 269ST works in tandem with Section 40A(3) (disallowing cash payments above Rs 10,000 as business expense) to push India toward a less-cash economy