What is Section 269SS?
According to Section 269SS, a person cannot accept a deposit or a loan or any specific sum (in this context, specific sum refers to an advance or otherwise, concerning the transfer of any immovable property) from anyone, except an account payee bank draft, account payee cheque, or through electronic clearing system via a bank account, if:
- The amount of loan or deposit or a specified amount is Rs. 20,000 or more.
- The total amount of loan, deposit, or specified sum is Rs. 20,000 or above. For instance, if you get a loan of Rs. 10,000, a deposit of Rs. 5,000, and an advance of Rs. 8000, you cannot accept it in cash because the total becomes Rs. 23,000.
- The person has already 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 Rs. 20,000 or more.
- The total of the three aforementioned points is Rs. 20,000 or more. Hence, a person cannot accept a loan or deposit of Rs. 20,000 or more in cash from another person.
Exceptions of Section 269SS
The income tax exemptions or exceptions under Section 269SS are as follows:
Any loan, deposit, specific amount is taken from or taken by the following entities:
- The government
- Any banking company, post office savings bank, banking organisations or cooperative banks
- A corporation formed by the Central, State, or Provincial Act
- A government company as 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
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:
- A person who earns only agricultural income accepts a loan or deposit from another person who also earns income from agriculture only.
- Receiving cash from a relative during financial emergencies, however, the intention shouldn’t be to evade taxes.
- Partners investing cash capital into their partnership firm.
Penalty on Contravention of Section 269SS
100% of the deposit or loan money can be levied as a penalty by the Assessing Officer.
Income tax authorities come across tonnes of unaccounted money during raids. Until the introduction of Section 269SS, culprits would escape the penalty claiming that it was received as a loan or deposit from friends and relatives. Hence, this section restricts cash loans and deposits at Rs. 20,000.