Bailabel Type : bailable

Description

Section 269T of the Income Tax Act, 1961 regulates the mode of repayment of loans or deposits by entities or individuals, specifically addressing cash transactions. It seeks to prevent the use of unaccounted money in repaying loans or deposits and promotes transparency in financial transactions. This section ensures that repayments of loans or deposits are carried out using traceable methods such as bank transfers, cheques, or demand drafts, rather than in cash.

Key Provisions of Section 269T:

1. Prohibition on Cash Repayment:

• Section 269T prohibits cash repayments for loans or deposits that exceed a certain threshold amount.
• A person cannot repay any loan, deposit, or specified sum to any other person in cash that exceeds ?20,000.

2. Applicability of Section 269T:

• This section applies when a loan or deposit is being repaid.
• The cash repayment is restricted only if the amount exceeds ?20,000. If the repayment is made through a cheque, bank draft, or electronic transfer, it is not subject to the provisions of Section 269T.

3. Transactions Covered Under Section 269T:

• The restriction applies to repayment of loans or deposits by an individual, company, or other person.
• It applies not only to business transactions but also personal transactions, such as the repayment of loans or deposits between individuals or between companies and individuals.

4. Payment Methods Allowed:

• Repayment of loans or deposits above ?20,000 can only be done through non-cash methods such as:
  • Bank transfer
  • Cheque
  • Demand draft
  • Electronic payment methods (RTGS, NEFT, etc.)

5. Exceptions to the Rule:

Section 269T does not apply to:

• Loans or deposits made to government bodies, financial institutions, or similar authorized entities that can accept or repay loans or deposits.
• Transactions that are made in cash below ?20,000 are not subject to Section 269T.

6. Aggregate Limit:

• The provision applies when the aggregate repayment of loans or deposits exceeds ?20,000 in a single day. This means multiple repayments within a day, totaling more than ?20,000 in cash, will be prohibited.

7. Penalty for Violation:

• Penalty under Section 271E:
  • If a person violates Section 269T by repaying a loan or deposit in cash exceeding ?20,000, they are subject to a penalty under Section 271E.
  • The penalty will be equal to the amount of the loan or deposit that was repaid in cash in violation of Section 269T.
  • For example, if a loan of ?30,000 is repaid in cash, the penalty could be ?30,000 under Section 271E.

8. Example of Violation:

• Example: A business repays ?25,000 in cash to a creditor on a single day.
  • Since the payment exceeds the prescribed limit of ?20,000, this would be a violation of Section 269T.
  • The business may be liable for a penalty of ?25,000 under Section 271E.

Punishment

Penalty under Section 271E:

• If a person violates Section 269T by repaying a loan or deposit in cash exceeding ?20,000, the penalty is 100% of the cash repayment amount.
• For instance, if an individual repays ?30,000 in cash for a loan, the penalty will be ?30,000.