Section 269ST came into effect from April 1, 2017. This section was introduced by the Central Government in the Finance Act 2017 to curb and stop the circulation of black money and to minimize the easy availability and supply of cash by discouraging cash transaction and by promoting digital economy. The provisions of this section provide a penalty for any cash transaction above the value of INR 2 Lakh.
Computation of Limit
Limit Of Receipt From A Single Entity In Cash Etc. In A Day under section 269ST
• Under clause (a), limit is applicable on receipts from an individual, entity and so on in cash and other modes in a single day.
• This limit does not apply to receipt from an entity in a day for total receipts from any one entity in a single day.
• The limit also holds true only when related to receipts from a single entity in one day and not from more than one entity in a single day.
When Partial Payment Is Through Permissible Mode And Partial Through Other Mode
When half the amount is received from the account payee cheque etc, and remaining amount is received through cash etc, then the entire limit of Rs 2 lakh or more would be related to the amount received through cash. Other modes and the amount received through permissible modes would not come under the said limit.
Limit under Section 269ST In Respect Of Single Transaction:
As per clause (b), restriction is levied for each transaction as well and the limit is put along with the limit of total receipt per day from a single entity. Under this limit, an entity is eligible to receive less than Rs 2 lakhs related to a single transaction through cash etc. and other modes. Anything above this limit is permissible only though account payee cheque etc. permissible mode.
Limit In Respect Of Single Transaction Jointly With Two Or More Entities
In case of joint transactions with multiple entities, there is a consolidated limit of all the payees for that single transaction. There might not be separate availability of the limits in respect of all the payees for the transaction. Further, there might not be the option of single payee in respect of a single transaction.
Limit In Respect Of All The Transactions Related With One Event Or Occasion
Under clause C, the restriction is also applicable in case of all the transactions linked with any single event or occasion. The limit would be implemented along with the limit of aggregate receipt every single day from a single entity as well as with the limit related to the single transaction. Under the clause, an entity can receive less than Rs 2 lakhs related to all the transactions related to a single event or occasion.
However, there is no definition or description of the words “event” or “occasion” mentioned under the section 269ST. Further, the circular also does not describe any real-life examples of event/occasion.
Above restrictions and provisions are not applicable to any receipt by Central Government, Local Authorities, Bank, Financial Institutions, Post Offices, Co-operative banks, and such other person as notified by the Government in the Official Gazette.
Penalty for contravention:
If a person receives any sum in contravention of the provisions of this section he shall be liable to pay, by way of penalty, a sum equal to 100% of the amount of such receipt. The penalty is levied by the Joint Commissioner of Income Tax. However, if the person proves he has not contravened the provisions or there were good and sufficient reasons for such contravention, the penalty shall not be levied.
Hence, to encourage the cashless economy, a person should follow the provisions and rules as specified in Section 269ST of Income Tax Act,1961. It should be kept in mind that the amount exceeding INR 2 lakh shall not be received from ‘a single person’, for ‘a single transaction’ and in a ‘same day’.