Objective:
To control the circulation of black money and create a disincentive against cash economy, the Government introduced section 269ST (Mode of undertaking transactions) w.e.f 01 April 2017.

Provision:

• No person should receive an amount of INR 2 lakhs or more other than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account

• The section covers all types of receipts whether it is capital or revenue.
• The section also restricts cash receipts whether for business or personal purpose.
• The payer of the money is not liable for any penalty BUT the restriction is on the receiver of the cash who is liable to penalty in case of violation.

Exceptions: The section is not applicable in the following circumstances:

• if cash is RECEIVED FROM Government, banking company, post office savings bank or co-operative bank;
• transactions referred to in section 269SS;
• other notified persons

Consequences of violation: Section 271AD deals with the violation of the section. Penalty = Amount received

Illustrations:

Scenario	Particulars		Implications for	Applicability of the section
A	Receipt in a Single day	Mr. X paid Rs. 2,50,000/- (Pertaining to 3 different invoices of different dates) in cash to Mr. Y on 25/10/2019 for goods purchased	Mr. Y	Yes, as the same was received in a single day irrespective of the number and dates of the invoices.
B	Receipt w.r.t single transaction	Mr. A received Rs. 2,50,000 /- in cash from Mr. B over a period of 3 days for services provided for a total consideration of Rs. 3,00,000/-	Mr. A	Yes, as the entire amount pertains to one single transaction.
C	Transaction relating to one event or occasion from a person	Mr. C (event manager) receives Rs. 3,00,000/- for food, decoration, and music billed vide different invoices (Rs.1,00,000/- for each service) in cash from Mr. D	Mr. C	Yes, as the entire amount pertains to one specific event or occasion.
D	Transaction of gift	Ms. D receives Rs.3,00,000/- in cash as gift on her wedding	Ms. D	Yes, as the section does not differentiate between business or personal purpose, though such amount will not be treated as income in the hands of Ms. D.
E	Loan or deposit or specified sum	Mr. Y received Rs. 3,00,000/- as rental security deposit in cash for his let out commercial property	Mr. Y	No, as the transaction shall be covered u/s. 269SS which is an exception to the section.
F	Receipt of installment by a NBFC / HFC	NBFC receives Rs. 15,000/- as installment towards loan taken by Mr. M. However, the total of all instalments amounts to Rs. 2,20,000/-	NBFC	No, as single installment constitutes a single transaction and all the installments shall not be aggregated to determine the limit of Rs. 2,00,000/- as clarified by CBDT.
G	Cash withdrawal	M/s. ABC Associates withdrew Rs. 3,00,000/- from the bank account on single day	M/s. ABC Associates	No, as there is no restriction on cash withdrawal from bank as clarified by CBDT.

Conclusion: While the introduction of this section is an aggressive step to curb black money, it is practically difficult to implement it in a country like India. While it is difficult to track such transactions, there are chances that genuine cases will get penalized.