04 April 2017
Respected Sir,
I write this about the chaos in the minds of several tax payers with respect to section 269ST which bars assessee from accepting cash above ₹3,00,000 from
a) in aggregate from one person in a day
b) one single transaction
c) in respect of transactions relating to an event or an occasion.
There rose doubts among many assessees as to whether the aggregate cash transactions from a single person THROUGHOUT THE YEAR should not exceed ₹3,00,000 or the limit is not for the aggregate transactions in a financial year.
Kindly help me .... Thanks in advance ☺️
1. A new section 269ST has been inserted into the Income-tax Act 1961 by the Finance Act 2017. It provided restriction on cash transaction to the tune of Rs. 3 lakhs or more. Recently, this limit has been reduced to Rs. 2 lakhs. Much has been said, written and heard on this issue, yet this provision being new, there is still a lot of confusion and curiosity among people from all walks of life. In this article an attempt has been made to analyse the provisions of section 269ST and its impact on taxpayers.
Provisions of section 269ST:
2. The section provides as follows:
No person shall receive an amount of three lakh rupees or more—
(a) in aggregate from a person in a day; or (b) in respect of a single transaction; or (c) 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: Provided that the provisions of this section shall not apply to —
(i) any receipt by— (a) Government; (b) any banking company, post office savings bank or co-operative bank; (ii) transactions of the nature referred to in section 269SS; (iii) such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify. Explanation.—For the purposes of this section,—
(a) "banking company" shall have the same meaning as assigned to it in clause (i) of the Explanation to section 269SS; (b) "co-operative bank" shall have the same meaning as assigned to it in clause (ii) of the Explanation to section 269SS. Impact & Analysis:
3. From the bare reading of section 269ST, this section impacts the payee and not the payer. It is the payee or recipient who is made liable for violation of section 269ST in the form of penalty u/s 271D.
The section seeks to cover three major transactions:
1. Receipt of Rs. 3 Lakhs (now Rs 2 Lakhs) or more from a person in a day in the aggregate. 2. Receipt of Rs. 3 Lakhs (now Rs 2 Lakhs) or more in respect of a single transaction. 3. Receipt of Rs. 3 Lakhs (now Rs 2 Lakhs) or more in relation to one event or occasion from a person. For ease of understanding, let us take each of these transactions one by one.
(i) Receipt of Rs. 3 Lakhs (now Rs 2 Lakhs) or more from a person in a day in the aggregate: The first coverage of section 269ST relates to payments received in aggregate from a person in a day. Here the words 'a person' and 'in a day' are important. This section will get attracted if a sum of Rs. 2 Lakhs (under reduced limit) or more is received in aggregate from the same person in a single day. For example, if Mr. B receives certain sum of money amounting to Rs. 2 Lakhs or more from Mr. A in a single day, this would obviously be hit by section 269ST as the cash payment exceeds the specified limit. But the mischief of section 269ST would also be attracted if payments from Mr. A are received in different installments in a single day. In such cases, whether the specified limit has been exceeded or not will be determined on the basis of aggregate. For example, if Mr. A received payments from Mr. B on a single day in 4 equal installments of Rs. 50000/- each, the aggregate will cross the specified limit of Rs. 2 Lakhs and hence, would be hit by section 269ST. On the other hand, there will be no violation of section 269ST if payments are received from different persons in a single day and none of such payments exceed the specified limit of Rs. 2 Lakhs. For example, in a single day Mr. A received payments from four different persons namely B, C and D and all these payments are within the specified limits, then even though in aggregate total receipts exceeded the limit of Rs. 2 Lakhs, the section would not be attracted. It is to be remembered that the section uses the word 'receives', it does not necessarily use the words sale consideration or payment or the like. Therefore it covers all receipts which are not covered by section 269SS whether by way of sale of movable goods, cash gifts, cash received for providing a service, donations made in cash etc. (ii) Receipt of Rs. 3 Lakhs (now Rs 2 Lakhs) or more in respect of a single transaction: The second coverage of section 269ST is receipt of Rs. 2 Lakhs (under revised limit) or more in respect of a single transaction. It envisages the receipt of Rs 2 lakhs or more in respect of a single transaction though not in aggregate on a single day. To illustrate, if Mr. A receives a sum of Rs. 6 Lakhs in respect of a single transaction, in four installments of Rs. 1.5 Lakhs each, on different dates, then obviously it will not fall under first coverage as aggregate is out of question being payments received on different dates. But if such payments are received in respect of a single transaction say for a single sale bill, such receipts would fall under second category of prohibited transactions even though none of these receipts was of Rs. 2 Lakhs or more. This is a very important condition which prohibits the splitting of payments over several days. (iii) Receipt of Rs. 3 Lakhs (now Rs 2 Lakhs) or more in relation to one event or occasion from a person: This is the third coverage of section 269ST and perhaps the wider of the earlier two and also probably litigation prone. This condition is certainly of widest amplitude as it seeks to cover all receipts from a person in relation to transactions relating to one event or occasion. What is meant by event or occasion or what all events and occasions are covered have not been explained or attempted to have been explained in the provision. Therefore, it is understood that it will cover all transactions relating to one event or occasion such as cash gifts on the occasion of marriage, birthday, anniversary or the like, payments made in respect of catering, decoration etc. in marriage, travel expenses, payments of rent etc to name a few. So it is this condition that is more likely to impact the everyday life of people. Under the income tax law, as we all know gifts received from 'relatives' are exempt without any upper limit. This means that a person can receive gift of any amount from a relative as defined under section 56. But with the introduction of section 269ST one limitation will be imposed on cash gifts received even from relatives to the tune of less than Rs. 2 Lakhs in respect of single event or occasion. Generally in India it is customary to give cash gifts from the bride's side to the bridegroom's side whether as dowry or otherwise. Now with the advent of this new provision, such cash gifts must be below Rs. 2 Lakhs as it will fall under third category being related to single event or transaction, even if the payer is a relative. Moreover, even a general cash gift which is not pertaining to any event or transaction, should also be less than Rs. 2 Lakhs otherwise the recipient will invite penalty u/s 271D. This clause will also cover those instances where in the event like marriage, payments are received for different categories like catering, decoration, marriage hall etc. Each of these transactions must be below specified limit.
Conclusion
4. In the nutshell it can be safely concluded that newly inserted section 269ST seeks to restrict wide amplitude of transactions in cash. It places restriction on cash received by a person amounting to Rs. 2 Lakhs or more. The restriction is on the payee and not on the payer, so it is the payee who will invite penalty u/s 271D for any violation of section 269ST. The section includes within its sweep all cash receipts of whatever nature such as cash sales, cash gifts, donations made in cash, compensation, encashment of securities/instruments etc. A penalty equal to the amount of such receipt shall be imposed u/s 271D. It has also been provided that penalty shall not be imposable if such person proves that there were good and sufficient reasons for the contravention. What will constitute good and sufficient reasons for contravention have not been defined. Perhaps this needs some clarification or suitable amendment in section 271D so as to bring out clearly what all reasons are covered under the expression good and sufficient reasons. It also remains to be seen how the information regarding cash receipts in contravention of section 269ST shall come into the knowledge of the department.
In short, the provisions of section 269ST will affect every walk of life in view of its wide amplitude.
04 April 2017
Sir... if a wholesaler makes cash sales to a retailer in different dates for different orders and different cash bills were generated, and the aggregate of transactions in a year made with a customer by such wholesaler exceeds 2lakh limit... can that be out of the scope of 269ST in view of above explanation?
04 April 2017
The article referred by CA CS Gopal Somani is written by me and published by Taxmann. Thanks for quoting the same. As for the query raised by Prameela P as long as payment is received in respect of different cash bills on different dates even by a single person and the aggregate of such payments crossing 2 lakhs it will not be covered under clause a, b or c of section 269ST as because different cash bills are issued every cash bill will be a separate transactions and not a single transaction. But one caution is that no cash bill should be of Rs 2 lakhs or more and none of the payment should be of Rs 2 Lakhs or more.
05 April 2017
A press release has been issued. Cash withdrawal from bank is not included under 269ST Below is the link http://www.incometaxindia.gov.in/Lists/Press%20Releases/Attachments/610/Press-Release-on-promoting-Digital-Economy-5-4-2017.pdf
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