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CASH TRANSCTION RULES UNDER INCOME-TAX ACT

Cash Transaction (Limits & Penalty)

Cash Transaction (Limits & Penalty) - In Indian economy, cash transactions has always played a major role for birth black money. The Government has now initiated various measures to wash cash transactions and boost digital payments.

Cash Transaction Limit (Sec 269ST) - The Finance Act 2017, took various measures to restrain black money and as an outcome of which, a new section 269ST was created in the Income Tax Act. Section 269ST imposed restriction on a cash transaction and limited it to Rs.2 Lakhs per day. Section 269ST states that any person shall not receive an amount of Rs 2 Lakh or more in a single day either

  • In aggregate from a person in a day or

  • In respect of a single transaction or

  • In respect of transactions relating to one event or occasion.

  • Central Board of Direct Taxes (CBDT) has clarified that, cash withdrawal limit does not apply for withdrawals from Banks and Post offices. Thus the provisions of section 269ST will not apply to


  • Cash received through an Account Payee Cheque or an Account Payee Bank draft or use of electronic clearing system (ECS) through a bank account.

  • Any receipt by the Government, any banking company, post office savings bank or co-operative bank.

  • Transactions of nature referred to in section 269SS.

  • Such other persons or class of persons or receipts, which the Central Government may, by notification Official Gazette, specify.

Withdrawal from Banks

The amount can be withdrawn from both savings account and current account using a chequebook/withdrawal slip or using a debit card. Cash withdrawal limit of various banks depends on the type of card being used. It varies from 10,000 to 50,000 per day based on the bank. However, the transaction details notified by the State Bank of India is furnished below.

  • Withdrawals using chequebook has been restricted to 60 withdrawals per year by most of the banks.

  • The amount of money that can be debited from current account is limited to Rs.1,00,000 per week whereas an overall of Rs.24,000 can be drawn per week from the savings account.

  • ATM withdrawals allow Rs.20,000 to be drawn per day and permits 5 transactions free whereas 3 transactions from other ATMs should be chargeable.

Cash Transaction Limit under Income Tax: The following are the main income tax sections that pertain to cash transaction limit:

  • Sec. 40A(3) and 43 – Pertains to Cash Payment

  • Sec. 269SS and 269ST – Pertains to Cash Receipts

  • Section 269T – Pertains to Repayment of Certain Loans / Deposits.

  • Sec. 40A(3) of Income Tax - Section 40A(3) of the Income Tax Act pertains that if payment for any expenditure over Rs.5,000 is made in cash, then the expenditure will be disallowed under the Income Tax Act. Hence, its important that any payment for expenses over Rs.5,000 may be carried through proper banking channel.

  • Sec. 43 of Income Tax -Under sec. 43 of Income Tax Act, if a payment of more than Rs.5,000 is made for acquisition of an asset by cash, then that expenditure should be ignored for the purposes of determination of actual cost of the asset. So purchase assets to make all payments to the seller through banking channels only.

  • Sec. 269SS of Income Tax – Sec. 269SS disallow , that taking or accepting loans sum of more than Rs.20,000 in cash. All loans more than Rs.20,000 must always be taken through bank accounts.



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  • Section 269SS of the Income Tax Act is however not applicable when accepting/taking loan or deposit from a person or entity mentioned below:

  • Government;

  • Any banking company, post office saving bank or co-operative bank;

  • Any corporation established by a Central, State or Provincial Act

  • Any Government company as defined

  • Institution, association or body of associations notified by Central Government in its official gazette.

Penalty under Section 269SS -

Penalty under Section 269SS - Failure to comply with provisions of section 269SS could lead to a penalty equal to the amount of loan or deposit or specified sum accepted.

  • Section 269ST of Income Tax Act - Section 269ST of Income Tax Act provides that no person can receive an amount of INR 2 Lakhs or more in cash.(mentioned above)

  • Provisions of Section 269ST are not applicable, when cash of more than Rs.2 lakhs is received from following person.


  • Government;

  • Any bank, post office saving bank or co-operative bank;

  • Institution, association or body of associations notified by Central Government in its official gazette.

Penalty under Section 269ST

As per section 271DA, in case of failure to comply with provisions of section 269ST, penalty amount equal to the amount of receipt is payable.

  • Sec. 269T of Income Tax Act – Sec. 269T provides that any bank or a co-operative society, firm or any other person cannot repay loan or deposit otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person, who has made the loan or deposit if

    • • The amount of the loan or deposit together with interest is Rs 20,000 or more or

    • • The aggregate amount of loans or deposits held by such person, either in his name or jointly with other person on the date of such repayment together with interest is Rs 20,000 or more.


Penalty under Section 269T

  • As per section 271E, in case of failure to comply with provisions of section 269T, penalty amount equal to the amount of loan or deposit repaid is payable.
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