The Income Tax Act is the regulatory guideline with various rules and guidelines to administer the tax imposition in the nation. Section 269SS and Section 269T are part of the Income Tax Act. These sections are imposed to deal with cash repayment and payment of loans and deposits.
By imposing these sections, authorities are promoting digital payments. Here in this section, we will learn, in detail, the intricacies of both these sections.
Section 269SS of Income Tax Act explains that an individual cannot accept a deposit or loan made by another person other than in the specified modes of payment, if there are certain conditions, such as:
If the specified deposit or sum is ₹20,000 or more. For instance, if person X wants to take a loan of ₹40,000 from his friend Y, he cannot accept the same in cash.
Further, if the sum of the loan, specified amount and deposit is more than ₹20,000. Suppose a person wants to take a loan of ₹15,000 and along with it, an advance payment of ₹10,000; then he cannot accept this in cash as it exceeds the limit of ₹20,000.
Moreover, suppose the individual has received a loan from the depositor and the first amount of the loan and deposits has yet to be paid back by the individual. In that case, if the unpaid amount and request for a new loan are over ₹20,000, the individual cannot accept a loan in cash under section 269SS of the Income Tax Act.
For instance, suppose an individual has taken a loan of ₹10,000 on Sep 1, 2023, and requested another loan of ₹15,000 on Sep 15, 2023. If the earlier loan is still unpaid, and a new request has been made, then the rule of Sec 269SS is applicable. In this case, the individual cannot accept payment requested on Sep 15, 2023, via cash.
The specified or acceptable modes of transaction under section 269SS of income tax act are:
Credit and Debit Card
Electronic Clearing System
However, there are certain exceptions to section 269SS, as listed below:
The income tax Section 269SS will not be enforced if the specified deposit, loan or sum is accepted from the following entities:
Corporations or entities established by central, state, or provincial act.
Banks, post office banks, and other cooperative banks.
Government organisation that comes under the Companies Act, 2013.
Lastly, any institution or body specified under the Official Gazette.
Individuals whose livelihood is farming can take loans or deposits from another person who earns only from farming.
If the individual is taking out cash as a loan from their relatives during an emergency, such a loan is exempted under this section. However, the intention of taking a loan or deposit should not be to evade tax.
The cash invested in partnership firms is exempted from Section 269SS.
If the individual violates Section 269SS of the Income Tax Act, and has accepted a loan or deposits above the defined threshold via cash, he must pay the total or 100% of the loan and deposit amount. The receiver must ensure that the income tax law provision under Section 269SS should be met while accepting any payments. The penalty can be waived if the receiver presents the proper reason to the assessing officer for the transaction.
Section 269T of the IT act explains that an individual cannot repay a loan, deposits, or specified sum in other mode than specified, if there are certain conditions, such as:
If the amount deposited or loan, including the interest, exceeds the ₹20,000 limit.
Further, if the amount of deposit or loan, including interest, held by the person's name or jointly with another person is above ₹20,000 limit.
There are certain exceptions where an individual need not comply with Section 269T of the Income Tax Act if he is paying to the below-mentioned parties:
Organisations or entities established or managed by state, central or provincial act.
Any banking organisation, cooperative banks, and post office banks.
Other notified institutions.
Government bodies come under section 617, Companies Act, 1956.
If the individual has failed to follow the condition imposed by section 269T of the Income Tax Act, then as a penalty, they need to pay the total amount of loan repayment or deposits. However, Section 273B of ITA provides relaxation to individuals with reasonable cause to undermine Section 269T of the Income Tax Act.