269ST of Income Tax Act was introduced in the Finance Act, 2017 with effect from 1st April, 2017 for reducing the instances of huge cash transactions by imposing a high penalty for cash transactions above Rs. 2 lacs. The objective of Section 269ST of Income Tax Act is to prevent cash dealings, curb instances of tax frauds and reduce the channels of black money in the market by streamlining the modes of payments and laying emphasis on banking channels and digital economy. Moreover it promotes transparency in the system and is crucial to strengthen the economy of the country.
Section 269ST of Income Tax Act
As per Section 269ST of Income Tax Act, 1961, no person other than the Government or a bank shall receive an amount of Rs. 2 lacs or more –
- In aggregate from a person in a day, or
- In respect of a single transaction,
- In respect of transactions relating to one event or occasion from a person
Otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account or such electronic modes as may be prescribed.
Exclusions from Section 269ST of Income Tax Act
The implications of section 269ST of Income Tax Act will not be applicable in any of the following cases –
- Transactions that are already covered u/s 269SS of Income Tax Act
- Receipts by any person from a bank
- Where the recipient is a government
- Where the recipient is any banking company, post office savings bank, cooperative bank, etc.
- Such recipients as may be notified by the government.
Repayment of loan from NBFC/HFC
After this section was introduced, several NBFCs and HFCs sought clarification on whether the Rs. 2 lacs limit applies to each individual loan instalment or to the total repayment amount. In response, the Income Tax Department clarified that for loans repaid to NBFCs or HFCs, each instalment is considered a separate transaction. Therefore, if an individual loan instalment is below Rs. 2 lacs, it may be paid in cash. Multiple instalments for a single loan do not need to be combined to assess the Rs. 2 lacs threshold.
Penalty for violation of Section 269ST of Income Tax Act
In cases of non-compliance of section 269ST of Income Tax Act, penalty u/s 271DA will be levied. Such penalty will be equal to the amount of such receipt i.e. If you receive Rs. 3 lacs in cash for selling a car, you violate section 269ST and under Section 271DA, a penalty of Rs. 3 lacs can be levied. This penalty shall be imposed by the Joint Commissioner and can be removed if the person can prove sufficient cause for the transaction.
Illustrations for applicability of 269ST of Income Tax Act
| Mr. A receives Rs. 2.10 lacs in cash from Mr. B on a single day for selling furniture. | Cash received from one person in a single day exceeds the Rs. 2 lacs limit. Therefore, this is in violation of Section 269ST and a penalty of Rs. 2.10 lacs will be imposed u/s 271DA. |
| Ms. C gets Rs. 1.50 lacs in cash one day and Rs. 1 lac the next day for a single service agreement. | Payments are for a single transaction, even if received on different days. Therefore, this is in violation of Section 269ST and a penalty of Rs. 2.50 lacs will be imposed u/s 271DA. |
| An event planner receives Rs. 1 lac in cash on three different dates for the same event, aggregating Rs. 3 lacs. | The payments are related to one occasion/event, and together exceed the Rs. 2 lacs cash limit. Therefore, this is in violation of Section 269ST and a penalty of Rs. 4 lacs will be imposed u/s 271DA. |
Supreme Court Decision – April 2025
The Supreme Court emphasized stricter oversight of large cash transactions in legal and property matters. It directed that whenever cash payments of Rs. 2 lacs or more surface in civil suits or property registrations, such instances must be reported to the Income Tax Department. This step is intended to enhance tax transparency and curb misuse of cash dealings in legal disputes and settlements.
Latest Judgement of Delhi High Court
In the case of Birmala Projects (P.) Ltd. v. Ashwani Ahluwalia, the Delhi High Court held that mere receipt of cash and the alleged violation of section 269ST does not automatically render the agreement void or unenforceable in court. Moreover, the Court’s focus on the principle of unjust enrichment reinforces that regulatory norms should not be misused to escape contractual responsibilities. Permitting the defendant to retain the amount due to a mere technical breach would have set a problematic standard, undermining fairness in contracts. The Court appropriately affirmed that both legal and contractual rules must be applied to prevent any unfair advantage.
Circular 25/2022 – Milk Producer’s Cooperative Society
In respect of the Milk Producer’s Cooperative Society, dealership/distributorship contract by itself does not constitute an event/occasion under 269ST(c). No aggregation across multiple days to be done as long as 269ST(a) and (b) are complied with.
What is the difference between section 269SS and 269ST?
Section 269SS prohibits accepting loans, deposits, or specified advances of Rs. 20,000 or more in cash, requiring such transactions to be done through banking modes. In contrast, Section 269ST restricts receiving Rs. 2,00,000 or more in cash from a person in a single transaction, in a day, or for a single event, regardless of the nature of the receipt. While 269SS targets cash-based loans and advances, 269ST applies broadly to all high-value cash receipts.
Section 269ST is applicable from which assessment year?
269ST of Income Tax Act was introduced in the Finance Act, 2017 with effect from 1st April, 2017.
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About the Author This article is written by FCA Eshita Krishna , an experienced Chartered Accountant with advanced ICAI certifications in DISA, Anti-Money Laundering, Real Estate Laws, and Forex & Treasury Management. With strong expertise in direct and indirect tax, audit, risk advisory, financial planning, and financial management, she delivers accurate, experience-backed financial insights to readers.