Objective:
To curb the increasing cash transactions which are leading to accumulation of black money, the government had introduced section 269SS which restricts cash payments.

Provision:
Any deposit, loan or specified sum should not be accepted or taken from any person other than by an account payee bank draft, account payee cheque or through electronic clearing system via bank account if
 

“Loan or deposit” would mean any loan or deposit of money. “Specified sum” means any amount receivable in relation to transfer of immovable property such as earnest deposit, advance, etc…

Exceptions:
The section shall not apply in the below cases:

• If the receiver OR payer are the following parties
  • Government
  • Banking company, post office savings bank or co-operative bank
  • Corporation established by a Central, State or Provincial Act
  • Government company
  • Other institutions as notified by the Government
• If the receiver AND payer have agricultural income and there is no other income which is chargeable to tax under this Act.

Consequences of violation:
In case of violation, section 271D prescribes the penalty which is equal to the amount accepted.

Illustrations:

Scenario	Date of borrowing	Mode of borrowing	Amount borrowed	Amount already  o/s	Total	Applicability of the section
A	24-Sep-19	Cash	22,000	–	22,000	Yes, on INR 22,000
B	14-Jun-18	Cash	30,000	10,000	40,000	Yes, on INR 30,000
C	19-Oct-20	Cash	12,000	6,000	18,000	No
D	01-Jul-19	Cash	4,000	–	4,000	No
	01-Oct-19	Cash	12,000	4,000	16,000	No
	01-Nov-19	A/c payee cheque	3,000	16,000	19,000	No
	01-Dec-19	Cash	2,000	19,000	21,000	Yes, on INR 2,000
	30-Dec-19	Cash	500	21,000	21,500	Yes, on INR 500
E	06-Apr-18	Interest accrued	–	28,000	28,000	Yes, on INR 28,000

Judicial Pronouncements:

 

Conclusion:

• In summary, it can be said that an individual is NOT allowed to accept loan, deposit or specified sum in CASH of INR 20,000 or more.
• The responsibility to comply with the section is on the ACCEPTOR of such loan, deposit or specified sum.