Understanding the new Section 269ST of the Income Tax Act, 1961
INR 3 lakhs ceiling on cash transactions
In the Union Budget, 2017, Finance minister Mr. Arun Jaitley had emphasised the need to address black money formation and had proposed a ban on cash transactions over INR 3 lakhs.
To enforce this, a new section 269ST has been proposed in the Income-tax Act, 1961.
This new Section states that no person shall receive an amount of INR 3 lakhs or more from another person in a single day, for a single transaction, in any other form other than a cheque, bank draft or an electronic bank transfer.
The provisions of this new Section explained lucidly for the understanding of the common man:
- If one accepts INR 3 lakhs or more from the same person in a day even against different bills, this section is attracted.
2. If one accepts INR 3 lakhs or more from one person or different persons against one bill even on different days, this section is attracted.
- If one accepts INR 3 lakhs or more from a person for a series of transactions emanating from one event or occasion, this section is attracted.
Examples of violation of Section 269ST:
- If one sells goods worth INR 4,50,000/- through three different bills of INR 1,50,000/- each to one person and accepts cash in single day at different times then section 269ST(a) will get violated.
- If one sells goods worth INR 4,00,000/- through single bill to another person and receives cash of INR 2,00,000/- on day-1 and another INR 2,00,000/- on day-2 then section 269ST(b) will get violated.
- If one accepts cash of INR 1,00,000/- for catering, INR 1,50,000/- for decoration and INR 1,50,000/- for tent house work then section 269ST(c) will get violated even if cash is accepted on different dates.
Penalty for Violation of this section is 100% of cash received!
Be careful while accepting cash.
This section is applicable from April 2017
This Section shall not apply to Government, banks and post office savings bank and agricultural income.
Text of the Budget Memorandum proposing this new Section 269ST:
Restriction on cash transactions:
In India, the quantum of domestic black money is huge which adversely affects the revenue of the Government creating a resource crunch for its various welfare programmes. Black money is generally transacted in cash and large amount of unaccounted wealth is stored and used in form of cash.
In order to achieve the mission of the Government to move towards a less cash economy to reduce generation and circulation of black money, it is proposed to insert Section 269ST in the Act to provide that no person shall receive an amount of three lakh rupees or more-
- in aggregate from a person in a day;
- in respect of a single transaction; or
- in respect of transactions relating to one event or occasion from a person,
otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account.
It is further proposed to provide that the said restriction shall not apply to Government, any banking company, post office savings bank or co-operative bank. Further, it is proposed that such other person or class of persons or receipts may be notified by the Central Government, for reasons to be recorded in writing, on whom the proposed restriction on cash transactions shall not apply. Transactions of the nature referred to in Section 269SS are proposed to be excluded from the scope of the said section.
It is also proposed to insert new Section 271DA in the Act to provide for levy of penalty on a person who receives a sum in contravention of the provisions of the proposed Section 269ST. The penalty is proposed to be a sum equal to the amount of such receipt. The said penalty shall however not be levied if the person proves that there were good and sufficient reasons for such contravention. It is also proposed that any such penalty shall be levied by the Joint Commissioner.
It is also proposed to consequently amend the provisions of Section 206C to omit the provision relating to tax collection at source at the rate of one per cent of sale consideration on cash sale of jewellery exceeding five lakh rupees.
These amendments will take effect from 1st April, 2017
[Clauses 71, 83 and 84]
FCA, Grad. CWA, CS, DBM.