Section 271DA: Penalty for Cash Receipts Violating Section 269ST
Section 271DA of the Income-tax Act, 1961 provides for a penalty equal to the amount of a receipt made in contravention of Section 269ST. Understand the Rs. 2 lakh cash receipt limit, the three separate tests, exceptions and available relief.
1. What is Section 271DA of the Income-tax Act, 1961?
Section 271DA(1) provides that where a person receives a sum in contravention of Section 269ST, that person is liable to a penalty equal to the amount of the receipt. The proviso states that no penalty is imposable if the person proves there were good and sufficient reasons for the contravention.
Section 271DA(2) provides for imposition of the penalty by the Joint Commissioner. The provision was inserted by the Finance Act, 2017 (Act 7 of 2017), section 85, with effect from 1 April 2017.
Section 269ST restricts receipt of Rs. 2 lakh or more otherwise than through specified banking or electronic modes. It is a restriction on the recipient, not a general prohibition on every cash payment of a smaller amount.
2. Section 269ST: Three separate Rs. 2 lakh tests
Section 269ST applies if a person receives an amount of Rs. 2,00,000 or more in any of these situations:
| Statutory limb | What is restricted? | Illustration |
|---|---|---|
| Clause (a): From a person in a day | Aggregate receipts from the same person on one day | Cash receipts of Rs. 1,20,000 and Rs. 90,000 from the same person on one day can trigger the restriction. |
| Clause (b): Single transaction | Receipts in respect of one transaction, even across different days | A Rs. 2,40,000 transaction cannot be made compliant merely by collecting Rs. 1,20,000 in cash on each of two days. |
| Clause (c): One event or occasion | Receipts relating to one event or occasion from a person | Multiple cash instalments linked to a single wedding event can be aggregated for this test. |
The tests operate independently. Splitting a receipt across invoices, dates or instalments does not necessarily avoid Section 269ST.
3. Permitted modes of receiving Rs. 2 lakh or more
Section 269ST allows receipts through an account-payee cheque, account-payee bank draft, electronic clearing system through a bank account, or other prescribed electronic modes. Rule 6ABBA prescribes additional electronic payment modes, including specified electronic banking and payment systems.
Keep the invoice, bank advice, transaction reference and customer identification. An ordinary non-account-payee instrument should not automatically be treated as compliant.
4. Statutory exceptions and special situations
Section 269ST does not apply to receipts by Government, banking companies, post office savings banks and co-operative banks, or to transactions of the nature referred to in Section 269SS. It also allows exceptions for specified persons, receipts or classes of transactions notified by the Central Government. The scope and effective dates of relevant notifications should be checked before relying on an exemption.
Separate rules can apply to loans, deposits, property advances, withdrawals, agricultural transactions and other categories. A transaction's commercial purpose alone does not establish an exception.
5. Amount of penalty and statutory relief
The penalty is not a flat Rs. 2 lakh amount. It is linked to the contravening receipt. For example, a prohibited cash receipt of Rs. 3,50,000 can expose the recipient to a penalty of Rs. 3,50,000.
Good and sufficient reasons
The proviso to Section 271DA(1) expressly protects a person who proves good and sufficient reasons for the contravention. This is a fact-specific test, not an automatic waiver. Relevant records may include contemporaneous correspondence, banking evidence, the nature of the transaction and an explanation of why permitted modes could not be used.
Who imposes the penalty?
Section 271DA(2) assigns the penalty to the Joint Commissioner. The taxpayer should examine the notice, applicable procedural safeguards and relevant limitation provisions for the assessment period concerned.
6. Practical examples of Section 269ST violations
| Scenario | Indicative treatment |
|---|---|
| Rs. 1,90,000 received in cash for a standalone transaction with no linked receipt | Below the Rs. 2 lakh threshold, subject to checking all three statutory tests and other laws. |
| Rs. 2,00,000 received in cash from one person on one day | At the threshold; prohibited unless an exception applies. |
| Rs. 1,10,000 plus Rs. 1,00,000 received in cash from one person on the same day | Aggregated receipt of Rs. 2,10,000 may contravene clause (a). |
| Two Rs. 1,50,000 cash instalments for one Rs. 3,00,000 transaction | May contravene clause (b) even if paid on separate days. |
| Rs. 3,00,000 received by qualifying bank transfer | Not prohibited by Section 269ST merely because of the amount. |
Examples are illustrative; the statutory facts, exceptions and precise contravening receipts control the outcome.
7. Difference between Sections 269ST, 269SS and 269T
Section 269ST governs large receipts generally, subject to its own exceptions, with penalty under Section 271DA. Section 269SS regulates taking or accepting specified loans, deposits and sums, with penalty under Section 271D. Section 269T regulates repayment of specified loans, deposits and advances, with penalty under Section 271E.
These rules have different triggering conditions and must not be treated as interchangeable. For reporting-related provisions, see Section 271FA.
8. Income-tax Act, 2025: Check the applicable tax year
The Income-tax Act, 2025 commenced on 1 April 2026, with transition and savings rules affecting the continued treatment of earlier tax years and proceedings. The discussion on this page identifies Sections 269ST and 271DA by their numbering under the Income-tax Act, 1961. For transactions and proceedings governed by the 2025 Act, consult the corresponding provisions of that Act, as amended, and the relevant commencement and savings rules rather than assuming the section numbers remain the same.
For authoritative text and amendments, refer to the official Income Tax Department, the India Code legislative database and the Gazette of India.
9. Frequently asked questions
What is the penalty under Section 271DA?
The penalty is equal to the amount received in contravention of Section 269ST. The Joint Commissioner imposes the penalty, subject to the statutory relief for good and sufficient reasons.
Is receiving exactly Rs. 2 lakh in cash restricted?
Yes. Section 269ST prohibits receipt of an amount of Rs. 2 lakh or more in the specified circumstances, unless an exception applies or the payment is through a permitted mode.
Does the limit apply separately to each invoice?
Not necessarily. The law separately tests aggregate receipts from a person in a day, receipts for a single transaction, and receipts relating to one event or occasion from a person.
Can a penalty be waived for genuine reasons?
Section 271DA itself provides that no penalty is imposable if the recipient proves good and sufficient reasons for the contravention. Evidence is important.
Does Section 269ST apply to bank transfers?
The restriction targets receipt otherwise than by account-payee cheque, account-payee bank draft, electronic clearing system through a bank account, or other prescribed electronic modes.
10. Official legal references
This page provides general statutory information. Application depends on the transaction date, governing Act, notifications and facts; seek professional advice for an individual penalty notice.