Income-tax law | Cash transaction restrictions
Section 269ST of the Income-tax Act, 1961: Cash Receipt Limit, Exceptions and Penalty
Section 269ST restricts the receipt of Rs. 2,00,000 or more in certain circumstances unless payment is received through an authorised banking or electronic mode. The restriction can apply even when a payment is divided into smaller instalments.
Section 269ST: statutory provision and scope
The original statutory provision, inserted by the Finance Act, 2017 with effect from 1 April 2017, provides that no person shall receive an amount of two lakh rupees or more:
- Clause (a): in aggregate from a person in a day; or
- Clause (b): in respect of a single transaction; or
- Clause (c): in respect of transactions relating to one event or occasion from a person;
except through the payment methods permitted by the provision. The original text expressly named an account-payee cheque, account-payee bank draft and electronic clearing system through a bank account. Subsequent amendments also recognise other prescribed electronic modes. Refer to the current statutory text and the applicable rules when choosing a payment channel.
How the three Rs. 2 lakh tests work
| Test | Illustration | Result |
|---|---|---|
| One person, one day | A business receives Rs. 1,20,000 and Rs. 90,000 in cash from the same customer on one day. | The aggregate is Rs. 2,10,000; clause (a) is relevant. |
| Single transaction | Rs. 2,50,000 for one sale is collected in cash instalments on different days. | Splitting the collection does not, by itself, avoid clause (b). |
| One event or occasion | Cash receipts from the same person for services connected with one event total Rs. 2,20,000. | Clause (c) may apply even if receipts are split. |
These examples illustrate the statutory tests; the legal treatment of an actual receipt depends on the underlying facts, identity of the payer, and applicable exemptions.
Permitted payment modes
Where Section 269ST applies, the receipt must use an account-payee cheque, account-payee bank draft, electronic clearing system through a bank account, or another prescribed electronic mode. Prescribed electronic modes are addressed in Rule 6ABBA of the Income-tax Rules, 1962, subject to the rules and amendments applicable at the relevant time. An ordinary non-account-payee cheque is not the same as an account-payee cheque.
Statutory exceptions
The original provision excludes receipts by the Government; banking companies, post office savings banks and co-operative banks; transactions of the nature referred to in Section 269SS; and persons, classes of persons or receipts notified by the Central Government in the Official Gazette. Notification-based exemptions should be checked for the particular transaction and date.
Banking company and co-operative bank have the meanings assigned through the Explanation to Section 269SS. An exception for a transaction covered by Section 269SS does not mean that such a transaction is free of restrictions: Section 269SS has its own payment-mode requirements.
Penalty under Section 271DA
Section 271DA provides for a penalty equal to the amount received in contravention of Section 269ST. The statute also provides that no penalty shall be imposed if the person proves that there were good and sufficient reasons for the contravention. The penalty provision and its administration should be examined in light of the facts and applicable law.
Section 269ST compared with Sections 269SS and 269T
Section 269ST concerns certain receipts of Rs. 2 lakh or more. Section 269SS separately regulates the taking or acceptance of specified loans, deposits and certain property-related sums, generally using a Rs. 20,000 threshold. Section 269T concerns repayment of specified loans, deposits and advances. The scope, exceptions and penalty provisions differ.
Frequently asked questions
Is receiving exactly Rs. 2 lakh in cash restricted?
Yes, if one of the three tests applies and no statutory or notified exception is available. The wording is “two lakh rupees or more.”
Can cash receipts be split across several days?
Splitting payments may still attract the single-transaction test or the one-event-or-occasion test. Each case requires examination of the underlying arrangement.
Does Section 269ST apply to every cash payment?
No. The provision regulates specified receipts and includes statutory and notified exceptions. Other cash transaction rules may independently apply.
Official legislative references
Consult the Income Tax Department, the Income Tax e-Filing portal, and India Code for current statutory material, rules and notifications. For transactions spanning a legislative change, verify the law applicable on the date of receipt.
This article explains the Income-tax Act, 1961 provision and related rules; check the governing legislation and amendments for the relevant tax year. It is general legal information, not a transaction-specific opinion.