Section 269T: Mode of Repayment of Loans, Deposits and Specified Advances

What does Section 269T provide?

Section 269T of the Income-tax Act, 1961 restricted repayment of covered loans, deposits and specified advances in cash or other non-permitted modes where the prescribed Rs. 20,000 threshold was reached. It applied to branches of banking companies and co-operative banks, companies, co-operative societies, firms and other persons repaying such amounts.

Its purpose was to require traceable repayment channels for substantial loan, deposit and property-related advance repayments. The provision concerns repayment; acceptance of certain loans, deposits and property-related sums was separately governed by Section 269SS.

When does the Rs. 20,000 threshold apply?

Under the statutory tests, a permitted mode was required where any applicable amount reached Rs. 20,000 or more:

1. Individual loan, deposit or specified advance: The amount being repaid, together with interest payable on it, reached the threshold.
2. Aggregate loans or deposits: The total of loans or deposits held with the relevant payer, in the recipient's own name or jointly with another person, together with interest payable, reached the threshold.
3. Aggregate specified advances: The aggregate of property-related specified advances, including relevant interest, reached the threshold.

The statutory aggregation rules should be checked against the particular payer, account holdings and repayment date. Splitting a repayment into smaller cash instalments does not necessarily avoid Section 269T.

Permitted modes of repayment

The provision specified an account payee cheque or account payee bank draft drawn in the name of the person entitled to repayment, and electronic clearing through a bank account. Subsequent statutory amendments also recognised prescribed electronic modes; the applicable notified modes and effective dates must be checked for the relevant transaction.

A special proviso allowed a branch of a banking company or co-operative bank to repay a qualifying loan or deposit by crediting the recipient's savings or current account with that branch, subject to the statutory wording.

Statutory exceptions

The exceptions in Section 269T covered repayment of qualifying loans, deposits or specified advances originally taken or accepted from:

• the Government;
• a banking company, post office savings bank or co-operative bank;
• a corporation established by Central, State or Provincial legislation;
• a Government company, as defined under the applicable company law; and
• other institutions, associations, bodies or classes specifically notified by the Central Government in the Official Gazette.

Exemptions depend on the precise identity of the lender or payer of the original advance. A private person or ordinary business does not become exempt merely because it maintains a bank account.

Definitions and legal expressions

Loan or deposit

The statutory explanation referred to a loan or deposit of money repayable after notice or after a period, and included loans or deposits of any nature in the case of a person other than a company. The exact definition and applicable amendments should be considered for the relevant period.

Specified advance

A specified advance means a sum of money in the nature of an advance, by whatever name called, in relation to the transfer of immovable property, whether or not the transfer ultimately takes place. Thus, refund of a property booking advance may fall within the provision.

Banking company and co-operative bank

These terms take their meaning from the statutory explanation and the Banking Regulation Act, 1949. The classification of the institution matters for the exemption and banking-branch proviso.

Illustrative repayment situations

These examples are simplified; exclusions, aggregation, interest and the legislation in force on the transaction date may alter the outcome.

Penalty under Section 271E and relief under Section 273B

Under the Income-tax Act, 1961, Section 271E provided for a penalty equal to the amount of the loan, deposit or specified advance repaid in contravention of Section 269T. Section 273B provided protection from specified penalties where the person proved reasonable cause for the failure. Relief was not automatic and depended on the facts and evidence.

Section 269T should not be confused with Section 269ST, which addressed certain receipts of Rs. 2 lakh or more, or with Section 269SS, which addressed acceptance rather than repayment.

Legislative history and current applicability

The original page records important amendments, including substitution by the Finance Act, 2002, changes affecting electronic clearing in 2014 and inclusion of specified property advances by the Finance Act, 2015, effective 1 June 2015. The original reference to section 617 of the Companies Act, 1956 is historical and should be read in light of subsequent company-law changes.

Because the Income-tax Act, 2025 applies from 1 April 2026, readers should consult that Act and its transitional provisions for transactions governed by the newer legislation. This page remains an explanation of Section 269T of the 1961 Act and should not be used as a substitute for checking the operative provision on the repayment date.

Official legislative resources

For the authoritative text, amendments, prescribed payment modes and applicable notifications, consult the Income Tax Department, the India Code legislation database and the Gazette of India. The relevant Finance Acts, notifications and effective dates take precedence over a general explanatory article.