Is cash payment of loans & advance prohibited under income tax act .

Question BankCategory: Income TaxIs cash payment of loans & advance prohibited under income tax act .
Vinay asked 2 years ago

Is cash payment of loans & advance prohibited under income tax act .

1 Answers
Ashu answered 2 years ago

Restrictions on Cash Payment & Repayment of Loans ,deposits or any advances in relation to immovable property are provided under section 269SS and 269T of Income tax Act.
Section 269SS prohibits Cash payment of loans, deposits or any advances for Rs. 20000 or more. and
Section 269T prohibits cash repayment of such loans, deposits or advance for Rs. 20000 or more. 
In Short, A person is not allowed to accept or repay any loan, deposits or advances of rs. 20000 or more from another person in cash. But such transaction should be only through an account payee cheque or electronic clearing system like net banking , UPI , BHIM app etc. 
Penalty for Contravention of section 269SS & 269T
If section 269SS & 269T are voilated then assessing officer can levy a penalty of 100% of amount of loan, deposits or advances. 
Exception to Section 269SS & 269T
Provisions of section 269SS & 269T are not attracted if :-

  1. Any loan or deposit or specified sum “taken or accepted from” or “taken or accepted by” the following entities –

a. The Government
b. Any banking company, post office savings bank or co-operative bank
c. Any corporation established by a Central, State or Provincial Act
d. Any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013)
e. Any institution, association or body or class of institutions, associations or bodies notified in Official Gazette

  1. A person earning only agriculture income accepts loan or deposit from  another person also earning only agriculture income (only for 269SS)
  2. Receiving cash from relative during emergencies. Here intention should not be to evade the taxes. ( assessed on case to case basis)


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