All you need to know on 269ST of the Income Tax Act

Black money is one of the most serious concerns confronting the Indian economy. To address the problem, the Indian government has been launching a series of strategic initiatives to combat black money. Cash transactions between parties in India are the primary source of black money. As a result, the government has taken explicit steps to establish a cash transaction restriction. The Income Tax Act’s Section 269ST was enacted to combat black money by prohibiting cash transactions. The following blog outlines the many aspects of Section 269ST of the Income Tax Act that a taxpayer should be aware of.

What is Section 269ST of the Income Tax Act?

The major goal of this part is to reduce the amount of black money in circulation. It was implemented with the goal of reducing cash-only transactions in order to regulate black money. According to Section 269ST of the Income Tax Act, no person or individual may receive cash in excess of INR 2 lakh.

Following are the conditions in Which no person or an individual should receive cash in excess of INR 2 lakh, as per the Section 269st Income Tax Act

• A person or an individual however can receive cash below INR 2 lakh in a single day.
• When a person divides a large sum of money into smaller invoices, the person on the receiving end is unable to accept it.
• The person on the receiving end cannot accept cash if the cash is received through several minor and unrelated transactions but is tied to a single occasion or event.

However, they can use an account payee demand draft, use an electronic clearing system through a bank account, or use an account payee cheque for the transaction above or equal to INR 2 lakh.

Know More: Changes on New Income Tax Portal 

Section 269ST of the Income Tax Act was enacted for the following reason

• In order to keep a check on illegal money.
• Tax transparency in relation to the transaction that is initiated in the country.
• The government imposed this section with a motive to curb black money.

For the following entity, there is an exemption under 269st of Income Tax Act

• Any Cooperative Banks
• Any Government
• For Post Office Savings Bank
• Any Banking Company
• A class of persons, or any other individual/person, or receipts that the Central Government may define in the Official Gazette by a notification

What effect does Section 269ST have on NBFC (Non-Banking Financial Company)?

Section 269ST would have an impact on NBFC transactions of the following sort when cash is utilized to give effect to the same.

• Receipt of a deposit
• Vehicles that have been repossessed and are being sold secondhand
• Expenses for renovations
• Acceptance of security deposit

When the amount of the aforementioned transactions surpasses INR 2 lakh, they must be carried out through banking channels. As a result, transactions that have been carried out in cash to date will no longer be feasible once this section is implemented.

Penalty on violation of Section 269ST of Income Tax Act

• An individual or person who violates the provisions of Section 269ST by receiving an amount of INR 2 lakhs or more would be subject to a penalty to the amount equal to the transaction. However, if the person can show that there were compelling grounds for the violation, the Court may absolve them of any penalty.
• The Income Tax Laws and Rules now include a new section 271DA. If an individual gets an amount in violation of any of the terms or norms of Section 269ST, they will be held liable to pay a penalty equivalent to the amount received in cash. In layman’s words, the punishment would be equal to 100 percent of the sum obtained in violation of this clause.

Conclusion

Section 269ST was enacted in order to address the problem of black money, which has plagued the Indian economy for decades. The provisions of section 269ST have impacted a huge number of people, and it is important to be cautious when conducting transactions to avoid penalties. Taxpayers should do their utmost to adhere to the rules of the section while bearing in mind the government’s goal of making the economy paperless.