With the Finance Act 2017, a new section 269ST has been incorporated in the Indian Income Tax Act, 1961 which completely deals with what happens when any Person received an amount of Two Lakh (2,00,000) or more Indian Rupees in Cash.
|Section 269ST – Cash Receipts related Tax Information|
Section 269ST, clearly says that No Person shall receive an amount of 2,00,000 or more Indian Rupees in Cash. Most of the people are wrongly guiding that should not receive more than 2,00,000 rupees in cash but it is not 2,00,000 it 1,99,999/-.
Why less than Two Lakh not more than 2,00,000/- Indian Rupees?
Let me clearly explain, In section 269ST itself clearly expressed that “No Person shall receive an amount of 2,00,000” it means that 2,00,000/- minus last Indian Currency denomination. At present the least currency running in the market is 1 (One) Indian Rupee. So, any Person can accept upto One Lakh Ninty Nine Thousands Nine Hundreds and Ninty Nine in cash as per this section (200000 – 1 = 199999).
Who is a Person u/s 269ST
And now see what does mean by Person. We can see the definition of Person u/s 2 sub-section 31 of the Act. Which explains that a Person means any of the following.
- An Individual
- A Hindu Undivided Family (HUF)
- An Association of Persons, Body of Individuals, Firm, or Company whether incorporated or not.
- A Local Authority, or Artificial Juridical Person
Finally, we came to know the exact amount that who can accept in Cash. Further there are 3 conditions specified in the Section 269ST. Let us see them in detail.
Condition No. 1: Aggregate from a Person in a Day
Here Aggregate means, Sum of Cash or Total of Cash, A Person defined u/s 2(31) shall not receive the Specified Amount from a Single Person in a Day. Here now onwards Specified Amount means acceptable amount in Cash explained in Paragraph 3.
Let us see with a demo. Mr. Hari is the business person who deals with heavy cash sales. He has his best friend Mr. Kishore who is also a business person who purchases from his friend Mr. Hari. He has the following business transactions.
- On 31-03-2017 Mr. Hari showed his friend Mr. Ramesh outstanding amount of Rs. 1,80,000/-.
- On 01-04-2017 he came to know that aggregate of Cash Sales is Rs. 2,50,000/-.
- One Cash Bill is raised against Mr. Ramesh, an amount of Rs. 80,000/-
He came to light of the Section 269ST. And he has the following problems let us understand his problems and help him to not to be attached by this section.
- How much Cash Mr. Hari can receive from his friend Mr. Ramesh on 01-04-2017?
- Is there any penalty from Total Cash Sales made during the day as it crossed the limit?
- On 01-04-2017 Mr. Hari can get cash from his friend Mr. Ramesh upto 1,19,999/-. Because he already received an amount of Rs. 80,000/- in cash from his friend. So, an Aggregate from a Person in a Day should not cross the specified amount so, 199999 – 80000 = 119999. The same has been illustration in the following table for better understanding.
- Section 269ST, says receipts from a person, so here Cash Sales exceeds specified amount is made more than one person, So, it will not attract the Section 269ST.
Mr. Ramesh Outstanding as on 31-03-2017
Cash Sales to Mr. Ramesh on 01-04-2017
Total Outstanding from Mr. Ramesh
Calculation as per Sec. 269ST
Cash Limit as per u/s 269ST
Cash received from Mr. Ramesh on 01-04-2017
Maximum amount can receive from Mr. Ramesh on 01-04-2017 as per Sec. 269ST
Condition No. 2: related to Single Transaction
Further, Section 269ST says that a Person shall not receive more than specified amount in respect of a single transaction.
For Instance, Mr. Manoj Kumar, Sold his Hyundai Grand i10 Vehicle to Mrs. Sreevani. And received a Cheque of Rs. 3,00,000/- and Rs. 1,50,000/- in Cash. As well. Mr. Manoj Kumar in his business he made Credit Sales to Honda Company details as follows
- Bill No. 257 Amount Rs. 25,000/-
- Bill No. 259 Amount Rs. 90,000/-
For the first case, Mr. Manoj Kumar will be attracted to section 269ST. Even though he receives the Cash less than the limit but the amount is related to a single transaction which is above the limited amount. We cannot split the mode of receipts if the transaction is beyond the stipulated limit u/s 269ST for Cash Receipt purpose.
In the second case, he can get in Cash for either 2 bills or for a single bill as the aggregate is below the limit.
Condition No. 3: transactions related to single Event or Occasion
This is the most confusing point in this section. And very complicated for a layman to understand the point. Here Event, Occasion have mentioned. There is no meaning explained for Event or Occasion in Section 2 of the Income Tax Act, 1961. Hence, we extracted the meaning from the English Dictionary.
“A thing that happens, especially something important Or a planned or Public or Social Occasion”
Eg., A Meeting of GST Committee was the main event of 2017.
For better understanding of the words, we cited an example above where the GST Committee Meeting was considered as an Event which is a Planned Event or Occasion. Let us interpret the example for our Condition No. 3. Mr. Kiran is an Event Manager, who got sub-contract work for the Event from Mr. John. For the even he provided the Installation of Stalls and supplied the Tea, and Snacks.
Here Mr. Kiran has provided the two transactions for an Event as follows.
- Installation of Stalls which costs Rs. 1,58,000/-
- Supply of Tea and Snacks costs Rs. 49,000/-
And he received payment from Mr. John 1,58,000/- on 26-04-2017 and 49,000/- on 29-04-2017 in Cash. As per the Condition No. 2 there are two transactions are recorded by the Supplier and Recipient but as per the Condition No. 3 these two transactions are related to a single Event or Occasion GST Meating. So, he cannot receive the payment in Cash as the Total Event value is more than the specified amount even though the transactions value are less the specified amount.
3 Situation where section 269ST is not applicable
The Act further provided that in the following situations this section shall not be applicable.
If a Person receives a sum of amount from a Government, Banking Company, Post Office, or Co-Operative Banks he/she no need to be accountable for this section. For the meaning of the Banks refer the Explanations part u/s 269SS.
So, any Person can withdraw from his Bank Account irrespective of the Type of Account like Savings, Current Accounts.
Transactions referred in section 269SS have been taken away from this section. Section 269SS, is completely related to acceptance of Loans, Deposits, and Specified sum.
Therefore, acceptance of these transactions not considered under this section, if any one need to accept such transactions in cash need to verify the section 269SS. We will soon update you with more information about section 269SS. So, subscriber to our blog for updates.
The Central Government may, by notification in the Official Gazette, specify the
- Persons, Class of Persons or Receipts
For whom or which this section shall not be applicable.
Therefore, any Person shall not accept the receipts from any person in cash more than Rs. 1,99,999/. Before accepting any Cash receipt, he/she/it has to understand under which of the 3 Conditions or 3 Situations the receipt will come.