The Income Tax Department has intensified its scrutiny of high-value cash transactions, urging taxpayers to exercise caution to avoid penalties or legal actions. Section 269ST of the Income Tax Act prohibits receiving cash payments of ₹2 lakh or more in a single day, either for a single transaction or for transactions related to one event or occasion. Violating this provision can attract severe penalties.
“Taxpayers should be aware that the Income Tax Department monitors high-value cash transactions exceeding certain limits, which can trigger notices from tax authorities,” said Abhishek Soni, CEO and Co-founder of Tax2win.
Soni explained that the restriction applies to individuals and entities alike, with the onus of compliance resting on the recipient of the cash. “No person can receive an amount of ₹2 lakh or more in aggregate from a person in a day, in a single transaction, or in respect of transactions relating to one event or occasion,” he said.
Cash Transactions Over ₹2 Lakh May Attract Penalties
Tax experts caution that any breach of this rule could lead to significant financial repercussions. Balwant Jain, a Mumbai-based tax expert, highlighted that the penalty for receiving cash in violation of Section 269ST is equal to the amount of cash received. For instance, accepting ₹5 lakh in cash could result in a ₹5 lakh penalty if discovered during an audit.
“Those who accept cash beyond the permissible limit can be subjected to a penalty equal to the cash received. Interestingly, the payer does not bear responsibility under these provisions,” Jain noted.
Understanding Section 269ST
Section 269ST stipulates that no one may receive cash exceeding ₹2 lakh in the following scenarios:
- In aggregate from a person in a single day.
- For a single transaction.
- For transactions related to a single event or occasion.
However, there are exceptions to this rule. Banking companies, for example, are exempt from the provision. “The applicability generally depends on the nature of the transaction. It’s important to ensure that cash transactions remain within the applicable limits based on the nature of the transaction,” said Surajkumar Shetty, Partner at JSA Advocates and Solicitors.
With the department’s close monitoring of such transactions, taxpayers are advised to remain vigilant and ensure compliance to avoid hefty penalties.