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Black money is the biggest issue faced by the Indian economy. To curb the problems raised by black money, the government has inserted Section 269ST in the Income Tax Act, 1961.
In the article, we will look into the purpose of incorporating Section 269ST in the Act.
Section 269ST of the Income Tax Act, 1961 states that no person must receive cash that exceeds Rs. 2 lakh or more in:
Other than by cheques, bank draft, or electronic way of transfer of funds from one bank account to another.
The government has introduced this provision to curtail the situation of increase in black money. The government believed that if the cash transactions are limited to a certain amount, it will help to control reduce the black money in the market because all the black money is being collected and shifted in cash transactions only.
The government felt a need to keep a check on illegal money and implement tax transparency for the transactions entered into the country.
Thus, the following conditions are to be satisfied by an individual before initiating a transaction is:
After the insertion of this provision, the ITD clarified that in case of repayment of loan to HFC or NBFC’s one instalment is considered as single transaction. Therefore, if the instalment is less than Rs. 2 lakhs it can be paid in cash. All the instalments cannot be construed as a part of single transaction and to determine the limit of Rs. 2 lakhs.
Before the insertion of Section 269ST in the Income Tax Act, sections 269SS and 269T were applicable. These sections discouraged the acceptance or repayment of loans, deposits via cash that exceeds Rs. 19,999/-. The provisions helped in curbing the use of black money. However, the outcome didn’t come as expected. Also, the penalty was there for those who violated these provisions.
A person is not held liable if he can satisfy the court that his intentions were bonafide.
No penalty will be levied in the following case:
The provision does not apply to the following categories of organizations.
The exceptions under the section are as follows:
The notification released on 3rd July, 2017 by the Ministry of Finance specified additional exceptions apart from the one mentioned above.
The additional exceptions are:
A penalty is to be imposed in case of non-compliance with Section 269ST under Section 271DA introduced in the year 2017. The penalty imposed is equal to the amount received by the receiver of cash. However, there is an exception to Section 271DA that if the receiver can prove that there were goods, he will not be liable.
The joint commissioner must impose the penalty to the cash receiver if the cash limit exceeds Rs. 2 lakhs.
Examples for the transactions covered under Section 269ST:
It is evident from the information above that the insertion of Section 269ST in the Income Tax Act helps in curtailing the black money present in the country. Thus, compliance with this section is very important and must be compulsorily complied with.
Read our article:How to file the Form 10BA of Income Tax?