Income-tax Act, 1961 | Chapter XX-B

Section 269SS: Rules for Accepting Loans, Deposits and Property Advances

Section 269SS regulates the mode of taking or accepting specified loans, deposits and amounts connected with transfers of immovable property. Its commonly applicable threshold is Rs. 20,000, calculated with reference to the same person and relevant outstanding balances. The provision is not confined to business transactions.

1. Section 269SS: statutory rule and its scope

The provision prohibits a person from taking or accepting from another person (called the depositor) a loan, deposit or specified sum otherwise than through the permitted banking or electronic channels when any of the following conditions reaches Rs. 20,000:

1. Clause (a): The amount or aggregate amount of the loan, deposit or specified sum proposed to be taken or accepted is Rs. 20,000 or more.
2. Clause (b): On the date of acceptance, an earlier loan, deposit or specified sum from that same depositor remains unpaid and the amount or aggregate unpaid balance is Rs. 20,000 or more, whether repayment has fallen due or not.
3. Clause (c): The sum of the proposed amount and the outstanding amount referred to above is Rs. 20,000 or more.

The original uploaded text specifies account-payee cheques, account-payee bank drafts and the electronic clearing system through a bank account. Later amendments also recognise such other electronic modes as may be prescribed. The applicable statutory text and rules should be checked for the relevant transaction date.

2. How the Rs. 20,000 threshold works

These illustrations assume that no statutory exception applies. The exact facts, transaction character and dates matter.

3. Permitted modes of acceptance

• Account-payee cheque.
• Account-payee bank draft.
• Electronic clearing system through a bank account.
• Other electronic modes prescribed under the Income-tax Rules, including modes notified under Rule 6ABBA, where applicable.

Prescribed electronic modes may include NEFT, RTGS, IMPS, UPI and other listed bank-linked methods, subject to the law and rules in force for the transaction. A non-account-payee instrument should not be treated as equivalent to an account-payee cheque or draft.

4. Persons and transactions excluded by the provisos

The first proviso excludes specified transactions involving the following persons or entities, whether as the person taking or accepting the amount or as the person from whom it is taken or accepted:

• The Government.
• A banking company, post office savings bank or co-operative bank.
• A corporation established by a Central, State or Provincial Act.
• A Government company within Section 2(45) of the Companies Act, 2013.
• Other institutions, associations, bodies or classes notified by the Central Government in the Official Gazette.

The second proviso excludes transactions where both parties have agricultural income and neither has income chargeable to tax under the Income-tax Act. This is a cumulative condition; agricultural status alone is not sufficient.

5. Definitions in the Explanation

Banking company

A company to which the Banking Regulation Act, 1949 applies, including banks or banking institutions referred to in Section 51 of that Act.

Co-operative bank

Has the meaning assigned in Part V of the Banking Regulation Act, 1949.

Loan or deposit

A loan or deposit of money.

Specified sum

Money receivable, whether as an advance or otherwise, in relation to the transfer of immovable property, whether or not the transfer ultimately takes place.

6. Penalty under Section 271D and reasonable cause

A contravention of Section 269SS can attract a penalty under Section 271D equal to the amount of the loan, deposit or specified sum taken or accepted in violation of the rule. Under Section 273B, the penalty is not imposable where the person establishes reasonable cause for the failure. Reasonable cause depends on the evidence and facts; it is not an automatic exemption.

Distinguish acceptance from repayment: Section 269SS concerns taking or accepting money. Repayment of certain loans and deposits is addressed separately under Section 269T, with a corresponding penalty provision under Section 271E.

7. Property advances and immovable-property transfers

Since the 2015 amendment, a specified sum includes an advance or other money receivable in relation to an immovable-property transfer, even if the sale does not proceed. For example, a buyer's cash advance towards a property purchase can fall within Section 269SS if the threshold and other conditions are met. The parties should document the transaction and use an appropriate permitted payment mode.

Section 269SS is in Chapter XX-B. It is distinct from the historical Chapter XX-A property-acquisition provisions, including Section 269RR. The 1986 Chapter XX-A cut-off does not make Section 269SS inapplicable.

8. Legislative history and interpretation

The original page records the insertion of the provision by Act 38 of 1981 (effective 11 July 1981), a 1984 amendment and substitution by the Finance Act, 2015 (effective 1 June 2015). The 2015 changes expanded the coverage to specified sums connected with immovable property. Subsequent changes to accepted electronic payment modes should be read with the applicable Income-tax Rules.

For a transaction governed by a different assessment or tax year, verify the law applicable to that date, including any transitional provisions under subsequent income-tax legislation.

9. Official legal resources

• Income Tax Department: Income-tax Act, 1961
• Income Tax Department: Income-tax Rules, 1962
• India Code: Central legislation
• Income Tax e-Filing Portal

Frequently asked questions

Does Section 269SS prohibit every cash loan?

No. The statutory monetary tests, outstanding balances, covered transaction types and exceptions must be considered. It is not a blanket prohibition on every cash loan of any amount.

Does the Rs. 20,000 threshold apply to a property booking advance?

It can. A property-related advance is included in the definition of a specified sum, whether or not the transfer is completed.

Is the penalty always equal to the cash amount?

Section 271D generally provides for a penalty equal to the amount accepted in contravention, subject to the statutory reasonable-cause relief under Section 273B.

This article is for general legal information. The application of statutory provisions depends on the transaction date, subsequent amendments, notified rules and facts.